Baht Set for Biggest Weekly Rally Since January on BOJ Easing

Thailand’s baht was set for its largest weekly advance since January and government bonds rose as Japan’s unprecedented monetary easing spurred demand for emerging-market debt.

The currency breached the 29 per dollar level for the first time since 1997 and the benchmark 10-year yield dropped to a five-month low this week. Global funds bought $810 million more sovereign debt than they sold since the Bank of Japan on April 4 announced 7.5 trillion yen ($75 billion) of bond buying a month. This year’s net purchases totaled $10 billion through yesterday, compared with $31 billion for the whole of 2012, Thai Bond Market Association data show.

“Thailand has seen quite a big impact from speculation of more fund inflows due to the BOJ’s easing,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “The bond yields may also remain under pressure to decline due to fund inflows from abroad.”

The baht climbed 0.9 percent from a week ago, the most since the five-day period ended Jan. 18, to 29.07 per dollar as of 8:21 a.m. in Bangkok, according to data compiled by Bloomberg. The currency, which declined 0.1 percent today, touched 28.88 on April 10, the strongest level since a devaluation in July 1997 that sparked the Asian financial crisis.

One-month implied volatility for the baht, a measure of expected moves in the exchange rate used to price options, rose two basis points this week, or 0.02 percentage point, to 5.26 percent. The rate was unchanged today.

The Finance Ministry is not considering new taxes to discourage fund inflows, Somchai Sujjapongse, director general of the Fiscal Policy Office, told reporters in Bangkok yesterday, adding that the central bank has other measures to manage the baht. Bank of Thailand Governor Prasarn Trairatvorakul said on April 10 that the bank will closely monitor the currency.

The yield on the 3.625 percent government bonds June 2023 fell six basis points from a week ago to 3.432 percent, data compiled by Bloomberg show. It dropped to 3.43 percent yesterday, the lowest since November.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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