Thailand’s baht dropped the most in three months on speculation the central bank will intervene to slow the pace of gains that may hurt exports. Government bonds were little changed.
The baht has rallied 6.2 percent against the dollar this year, the most among Asia’s 11 most-traded currencies. It has started to move beyond its fundamentals, central bank Governor Prasarn Trairatvorakul said April 19, while Assistant Governor Paiboon Kittisrikangwan said yesterday the baht has risen “too much and too quickly.” The dollar’s 14-day relative strength index has been below 30 since April 16, the threshold that suggests to some traders the baht’s gains have been excessive.
“A sharp appreciation is hurting exports, while those central bank comments are causing concern about possible intervention,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “There must be some profit-taking from the baht’s recent gain as well.”
The baht dropped 0.4 percent, the most since Jan. 25, to 28.79 per dollar as of 9:10 a.m. in Bangkok, according to data compiled by Bloomberg. The currency touched 28.56 yesterday and on April 19, the strongest level since a devaluation in July 1997 that sparked the Asian financial crisis
Overseas investors bought $2.1 billion more local sovereign bonds than they sold this month through yesterday, adding to net purchases of $9.8 billion in the first quarter, Thai Bond Market Association data show.
Exports, which account for about two-thirds of Southeast Asia’s second-largest economy, increased 2.3 percent in March from a year earlier after declining 5.8 percent in February, according to the median forecast of economists in a Bloomberg survey before a government report today due 1 p.m. local time.
“The basic trend remains for the baht to gradually rise on fund inflows due to the solid economic outlook,” Hayashi at the Japan Center for Economic Research said.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, was unchanged at 5.37 percent.
The yield on the 3.625 percent government bonds due June 2023 was 3.41 percent, data compiled by Bloomberg show. The Bank of Thailand will sell 25 billion baht ($868 million) each of 28-, 91- and 182-day bills today. The government plans to auction 17 billion baht of debt due 2017 and 7 billion baht of notes maturing 2027 tomorrow.
To contact the reporter on this story: Yumi Teso in Bangkok at firstname.lastname@example.org