Baht Snaps 3-Day Loss as Foreign Funds Boost Thai Bond Holdings

The baht ended three days of losses as international investors increased holdings of Thailand’s debt amid optimism the Southeast Asian nation’s economy is improving. Five-year government bonds rose.

Global funds bought $2.2 billion more sovereign debt than they sold this month through yesterday, taking this year’s net purchases to $12 billion, Thai Bond Market Association data show. The Bank of Thailand raised its 2013 growth forecast on April 12 to 5.1 percent from its January estimate of 4.9 percent. The central bank is concerned about the baht’s advance to a 16-year high earlier this month, Assistant Governor Chantavarn Sucharitakul said yesterday.

“Inflows in bonds continue and the baht is still under pressure to appreciate,” said Kozo Hasegawa, a currency trader at Sumitomo Mitsui Banking Corp. in Bangkok. “But there is concern about intervention and also some demand to buy dollars, slowing movements in the baht for now.”

The baht rose 0.1 percent to 28.90 per dollar as of 9:41 a.m. in Bangkok after reaching a one-week low of 28.99 earlier today, according to data compiled by Bloomberg. The currency touched 28.56 on April 22 and April 19, the strongest level since a devaluation in July 1997 that sparked the Asian financial crisis.

The baht has appreciated 5.8 percent this year, the most among 11 major Asian currencies, prompting central bank Governor Prasarn Trairatvorakul to say on April 19 the exchange-rate has started to move beyond its fundamentals.

The Bank of Thailand may introduce a minimum holding period for foreign buyers of domestic bonds, the Post Today reported, citing an unidentified central bank official. Overseas investors may have to pay a penalty for selling before the end of the lock-in period, the Thai-language newspaper said in a report today.

Governor Prasarn and Finance Minister Kittiratt Na-Ranong have said Thailand should not impose capital controls.

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, dropped eight basis points, or 0.08 percentage point, to 5.7 percent.

The yield on the 5.125 percent government bonds due March 2018 fell two basis points to 3.104 percent. The rate reached 3.103 percent on April 18, the lowest level since November 2010.

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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