Baht Falls Most in a Week on Rate-Cut Speculation; Bonds Advance
Thailand’s baht fell by the most in a week on speculation of interest-rate cuts after Finance Minister Kittiratt Na-Ranong said he will meet the central bank’s monetary policy committee on May 13.
Kittiratt has repeatedly asked for lower borrowing costs to stem fund inflows that sent the baht to a 16-year high in April. He said yesterday the central bank should focus on the exchange rate and not just on inflation. South Korea, Australia and India eased policy this month while the Bank of Thailand has kept rates steady. Most Asian currencies fell versus the dollar today as the yen breached the 100-level for the first time since 2009.
“Concerns about measures to stem currency gains, whether it’s intervention, a rate cut or capital controls, are keeping some depreciation pressure on the baht,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “With the yen’s weakness, there’s general downward pressure on regional currencies.”
The baht slumped 0.8 percent, the most since May 3, to 29.63 per dollar as of 8:43 a.m. in Bangkok, trimming the week’s gain to 0.2 percent, according to data compiled by Bloomberg. It is still up 3.2 percent this year, the best performance in Asia. It reached 28.56 on April 22 and April 19, the strongest level since July 1997.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped eight basis points today and 12 basis points this week to 6.26 percent.
Thailand’s benchmark interest rate of 2.75 percent compares with a maximum of 0.25 percent in the U.S. and 0.1 percent in Japan. It is still lower than neighboring Indonesia’s 5.75 percent, the Philippines’ 3.5 percent and Malaysia’s 3 percent.
The May 13 meeting will be attended by other government agencies as well, Finance Minister Kittiratt said yesterday.
Central bank Governor Prasarn Trairatvorakul said yesterday that the rate differential is a factor influencing capital inflows. He signaled he may be inclined to cut rates if economic growth starts to cool.
The yield on the 3.625 percent government bonds due June 2023 fell three basis points, or 0.03 percentage point, to 3.35 percent this week, data compiled by Bloomberg show. The rate declined one basis point today to the lowest level since February 2012.
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