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Thai Baht Climbs to 16-Year High on Capital Inflows Into Bonds

Thailand’s baht touched a 16-year high after global funds boosted holdings of local bonds amid signs policy makers will refrain from curbing capital inflows that have fueled the region’s best exchange-rate rally.

Central bank Governor Prasarn Trairatvorakul, who on April 19 said the currency has started to move beyond fundamentals, and Finance Minister Kittiratt Na-Ranong have ruled out capital controls. The baht has advanced 7 percent this year, beating a 1.9 percent gain in India’s rupee and 0.8 percent in China’s yuan. Foreigners bought $2 billion more Thai sovereign debt than they sold this month through April 19, adding to net purchases of $9.8 billion in the first quarter, official figures show.

“Inflows into bonds are continuing to put appreciation pressure on the baht,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “They seem to be tolerant in general with the appreciation and are unlikely to introduce any tough measures.”

The currency climbed 0.4 percent to 28.57 per dollar as of 8:48 a.m. in Bangkok, according to data compiled by Bloomberg. It touched 28.56 today and April 19, the strongest level since a devaluation in July 1997 that sparked the Asian financial crisis. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, increased nine basis points, or 0.09 percentage point, to 5.38 percent.

The yield on the 3.625 percent government bonds due June 2023 rose one basis point to 3.40 percent, data compiled by Bloomberg show.

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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