Thailand’s Baht Snaps Five-Day Decline on Fed Stimulus Outlook

Thailand’s baht rose, snapping a five-day loss, as an unexpected contraction in U.S. manufacturing eased concern the Federal Reserve will trim asset purchases that have fueled demand for emerging-market assets.

The Dollar Index, which tracks the greenback against six major counterparts, dropped yesterday by the most in almost five months after the Institute for Supply Management’s factory index fell to 49, the lowest reading since June 2009. Thailand will probably refrain from imposing capital controls because the baht has stabilized, Chularat Suteethorn, director general of the finance ministry’s Public Debt Management Office, said May 31.

The baht climbed 0.2 percent to 30.39 per dollar as of 8:25 a.m. in Bangkok, according to data compiled by Bloomberg. The currency touched 30.50 yesterday, the weakest level since Jan. 4. The currency has advanced 0.6 percent this year, a performance second only to China’s yuan among Asia’s 11 most-used currencies.

“The outlook for U.S. monetary policy remains the major factor moving the currencies and the dollar is broadly weaker on that,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “For Thailand, as the baht has weakened quite a lot versus the dollar, concern eased a bit over the potential capital controls.”

The baht touched 28.56 per dollar on April 22 and April 19, the strongest level since July 1997, prompting policy makers to consider steps to stem fund inflows. Bank of Thailand Assistant Governor Paiboon Kittisrikangwan said last week measures have been prepared to combat baht volatility although they may not be used if they aren’t necessary.

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, dropped five basis points to 6.58 percent.

The yield on the 3.125 percent government bonds due December 2015 rose one basis point, or 0.01 percentage point, to 2.72 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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