Baht Posts Weekly Gain on Junta Spending Pledge as Rupiah Falls

The baht was the best-performing Asian currency this week as Thailand’s junta pledged to boost spending to revive economic growth. Indonesia’s rupiah led losses after the country reported a surprise trade deficit.

The Bloomberg-JPMorgan Asia Dollar Index (ADXY), which tracks the region’s 10 most-active currencies excluding the yen, was steady for the week, erasing a decline after the European Central Bank cut interest rates to negative on June 5, potentially spurring fund flows to emerging-market assets. Thailand’s military administration, which took over in a May 22 coup, promised to step up infrastructure development and increase investment in areas adjacent to the nation’s borders.

“The perception is that the new Thailand government has provided stability and improved conditions for growth,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. The ECB’s stimulus program is “positive for high-yielding currencies such as those in Asia,” he said.

The baht appreciated 0.9 percent this week, the most since February, to 32.558 per dollar in Bangkok yesterday, according to data compiled by Bloomberg. The Philippine peso rose 0.2 percent to 43.65, while the rupiah fell 1.4 percent to 11,835 and Malaysia’s ringgit ended steady at 3.2122.

Foreign funds pumped $521 million into Thai stocks and local-currency sovereign bonds last week, exchange data show. The junta plans to speed up investment in a dual-track train project and promote economic development zones near borders with Malaysia, Myanmar and Laos, Air Chief Marshal Prajin Juntong, the head of economic affairs, told reporters in Bangkok on June 1.

Stocks Rally

The ECB became the first major monetary authority to use negative deposit rates to spur consumption, and said it would offer liquidity to lenders to boost credit growth. The euro rose against the greenback after the announcement and the MSCI Asia Pacific Index of shares closed yesterday at its highest level since October.

Inflation (PHC2II) in the Philippines accelerated to 4.5 percent in May, the fastest since 2011 and exceeding the median forecast of economists surveyed by Bloomberg for a rate of 4.2 percent, data showed June 5. That spurred speculation the central bank will raise borrowing costs at its June 19 meeting.

The rupiah had a third weekly drop after Indonesian authorities reported a $1.96 billion trade deficit in April, the biggest shortfall in nine months. The current-account gap may almost double this quarter from the previous period, central bank Governor Agus Martowardojo said June 5 in Jakarta.

‘Rupiah Weakness’

“Our view is for more rupiah weakness against the dollar,’ said Mika Martumpal, treasury research and strategy head at PT Bank CIMB Niaga in Jakarta. ‘‘We still see current-account deficit narrowing from 2013, but the second quarter will prove to be a challenging time.’’

Elsewhere in Asia, India’s rupee slipped 0.1 percent this week to 59.1825 per dollar and China’s yuan declined 0.1 percent to 6.2502. Taiwan’s dollar retreated 0.1 percent to NT$30.08, while South Korea’s won was little changed at 1,020.41 through June 5, with financial markets in the country closed yesterday for a public holiday. The Vietnamese dong dropped 0.1 percent to 21,185.

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Andrew Janes, Amit Prakash

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