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Baht, Swaps Climb After Bank of Thailand Raises Interest Rate

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Dec. 2 (Bloomberg) -- Thailand’s baht rose for a second day and onshore interest-rate swaps jumped to a three-month high after the central bank unexpectedly raised borrowing costs.

The baht touched a one-week high as the Bank of Thailand boosted its benchmark interest rate by a quarter of a percentage point to 2 percent yesterday, a move predicted by only five of 17 economists in a Bloomberg survey. China’s manufacturing sector expanded at the fastest pace in seven months in November, the nation’s logistics federation said yesterday.

“The surprise rate hike gives some support for the baht, leading to the dollar sell-off,” said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl, the nation’s biggest lender. “We also saw some good economic data coming out of China, boosting sentiment. If the baht rises too fast, the authorities may try to smooth volatility.”

The baht gained 0.1 percent to 30.01 per dollar as of 3:35 p.m. in Bangkok and touched 29.97, the strongest level since Nov. 25, according to data compiled by Bloomberg. The currency has advanced 10.9 percent this year, the best performance among Asia’s most-traded currencies.

The one-year onshore interest-rate swap, the fixed cost needed to receive a floating payment, rose 19 basis points to 1.655 percent, the highest level since September. A basis point is 0.01 percentage point.

Government bonds fell for a second day. The yield on the 3.125 percent debt due December 2015 added eight basis points to 3.12 percent, the highest level since May, according to Bloomberg data.

Price pressures are expected to increase in line with growth in the economy, central bank Assistant Governor Paiboon Kittisrikangwan said after yesterday’s rate decision. The monetary authority will “continue to normalize interest rates,” he said.

Finance Minister Korn Chatikavanij said an unexpected increase in the nation’s benchmark interest rate is a concern for economic growth. “We are concerned about the impact from the rate increase at a time when the economy has started to slow down,” Korn said today in Bangkok.

Southeast Asia’s second-largest economy grew 6.7 percent in three months through September, slowing from 9.2 percent in the previous three months, according to government data on Nov. 22.

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.