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Thai Baht, Bonds Advance This Week as U.S. Budget Impasse Ends

Thailand’s baht was set for its biggest weekly advance in a month and sovereign bonds rose as foreigners increased holdings of the nation’s assets after the U.S. ended a budget impasse and averted a debt default.

The currency touched the highest level in almost three weeks after the Senate voted Oct. 16 to halt a 16-day government shutdown and raise the U.S. debt limit. Global funds bought $370 million more Thai debt than they sold yesterday, the biggest one-day net purchase since Sept. 20, official data show. They added a net $217 million of local bonds and stocks this week through yesterday.

“The removal of the U.S. default risk added to improving risk sentiment,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Fund inflows are supporting the baht.”

The baht jumped 0.8 percent from a week ago and was unchanged today at 31.04 per dollar as of 8:43 a.m. in Bangkok, according to data compiled by Bloomberg. It touched 30.963 earlier, the strongest level since Sept. 23.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, slumped 48 basis points this week to 6.51 percent. The gauge fell 11 basis points, or 0.11 percentage point, today.

The Bank of Thailand kept its benchmark interest rate unchanged at 2.5 percent for a third meeting on Oct. 16. The central bank said after the decision that it plans to cut its 2013 growth forecast on Oct. 25 after trimming it to 4.2 percent from 5.1 percent in July.

The yield on the 3.625 percent bonds due June 2023 declined five basis points from Oct. 11 and one basis point today to 3.85 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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