Thai Baht Advances for Ninth Day on Fund Inflows; Bonds Rise

Thailand’s baht rose for a ninth day, the longest winning streak since 2008, as near-zero benchmark interest rates in the U.S. and Japan spurred demand for higher-yielding assets. Government bonds advanced.

The currency climbed to a 17-month high and the central bank said this week recent gains were being driven by capital inflows into the region. Global funds purchased $2.3 billion more of Thailand’s sovereign debt than they sold this month through yesterday and poured a net $274 million into local equities, stock exchange and Thai Bond Market Association data show. The nation’s 10-year debt yields 3.69 percent, compared with 1.81 percent in the U.S. and 0.74 percent in Japan.

“There’s a pretty strong momentum on the baht with a good amount of fund inflows,” said Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp. in Bangkok. “Compared with developed nations, Thai yields are still higher and investors can also aim to profit from the currency gains.”

The baht climbed 0.2 percent to 29.78 per dollar as of 3:08 p.m. in Bangkok after touching 29.72, the strongest level since August 2011, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, held steady at 4.3 percent.

Exporter Concerns

Thailand today joined a growing chorus of developing nations expressing alarm at the rapid appreciation of their currencies. The baht weakened earlier today after Finance Minister Kittiratt Na-Ranong said the currency is “not at a good level” and exporters will face difficulties should it strengthen further. The government has “no plan to use any drastic measures that will interfere with the market,” he said.

Kittiratt’s comments “caused the dollar-baht to pop up,” Woon Khien Chia, Singapore-based head of currency and rates strategy for Asia excluding Japan at Royal Bank of Scotland Group Plc, said in an e-mail.

Bank of Thailand Governor Prasarn Trairatvorakul said today that capital inflows into short-term securities were driving the currency higher, adding that the central bank is “closely watching” the situation and has measures to deal with the issue if needed.

Russia’s central bank warned yesterday the world is on the brink of a fresh “currency war,” while policy makers in South Korea and the Philippines said this week they may restrict capital inflows. Colombia’s finance chief called on his central bank to step up dollar purchases and the Czech Republic threatened intervention to weaken the koruna for the first time since 2002.

‘Investor Inflows’

Investors should simultaneously buy the baht and sell the Singapore dollar given fund inflows into Thailand, Oversea-Chinese Banking Corp Ltd., the top forecaster of Asian currencies based on data compiled by Bloomberg, said this week. HSBC Holdings Plc also recommended clients use the Singapore dollar as a funding currency in Asia and purchase the baht in a report on Jan. 15, citing the current-account surplus.

Thailand, Southeast Asia’s second-largest economy, reported a current-account excess of $392 million for November, compared with a deficit of $199 million the previous month, official data show. Singapore’s five-year bonds yield 0.31 percent, lower than Thailand’s 3.26 percent.

“The baht may remain underpinned by investor inflows, particularly given the nascent improvement in Thailand’s current-account balance and the central bank’s relative comfort with the currency’s recent rise,” said Emmanuel Ng, a Singapore-based strategist at OCBC.

Capital inflows totaling several billion baht have been recorded in Thailand’s bond market this week, mostly in short-term securities, Niwat Kanjanaphoomin, president of the Thai Bond Market Association, told reporters yesterday.

The yield on the 3.125 percent government bonds due December 2015 declined one basis point, or 0.01 percentage point, to 2.93 percent, data compiled by Bloomberg show. The benchmark three-year yield climbed as high as 3.50 percent in 2012.

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