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Baht Gains by Most in Eight Weeks on Fed Remarks; Bonds Steady

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Jan. 26 (Bloomberg) -- Thailand’s baht advanced by the most in eight weeks after the U.S. Federal Reserve signaled it would keep borrowing costs low until late 2014, bolstering sentiment toward higher-yielding assets. Government bonds were steady.

The currency snapped a two-day drop and the MSCI Asia-Pacific Index of stocks rose after Fed Chairman Ben S. Bernanke said yesterday the Fed is also considering additional asset purchases to boost growth in the world’s largest economy. The Dollar Index, a gauge of the greenback’s value against six major currencies, fell 0.6 percent in two days.

“The baht is benefiting from the Fed-inspired risk rally,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. The Fed’s comments are “a big boost for risky assets and a drag for the broad dollar trend,” he said.

The baht strengthened 0.8 percent, the most since Dec. 1, to 31.36 per dollar at 3:08 p.m. in Bangkok, according to data compiled by Bloomberg. The currency reached 31.31 earlier, the strongest level since Jan. 4.

The Bank of Thailand cut its one-day bond repurchase rate by a quarter of a percentage point to 3 percent yesterday, a decision predicted by all 15 economists in a Bloomberg survey. That is still 12 times the upper end of the range for the Fed’s benchmark rate.

The yield on Thailand’s 3.25 percent bonds due June 2017 was little changed at 3.08 percent, according to data compiled by Bloomberg.

The one-year onshore interest-rate swap, the fixed cost needed to receive a floating payment, added 3.5 basis points, or 0.035 percentage point, to 2.955 percent.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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