Baht Has Best Quarter in Two Years as Funds Boost Bond Holdings

Thailand’s baht had its biggest quarterly advance in two years and bonds rose after foreign investors pumped money into the nation’s sovereign debt.

International funds purchased $7.6 billion more government notes than they sold this quarter through yesterday, according to data from the Thai Bond Market Association. Southeast Asia’s second-largest economy grew 4.2 percent in the second quarter, following a 0.4 percent expansion in the previous three months, official data show. The European Central Bank and the Federal Reserve have announced measures this month to spur growth.

“With Europe and the U.S. taking a monetary-easing stance, funds tend to move to bonds and stocks in Asia that offer higher yields,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “Thailand has solid domestic demand and can probably withstand some weakening of external demand.”

The baht climbed 3.2 percent this quarter and 1.9 percent this month to 30.77 per dollar as of 3:17 p.m. in Bangkok, according to data compiled by Bloomberg. The currency rose 0.7 percent today and reached 30.66 on Sept. 17, the strongest level since March 27.

One-month implied volatility, a measure of exchange-rate swings used to price options, dropped 25 basis points, or 0.25 percentage point, from the end of June to 4.27 percent. The rate was unchanged today.

The yield on the 3.625 percent bonds due May 2015 dropped five basis points this quarter to 3.19 percent, according to data compiled by Bloomberg. The rate was steady today.

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