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Baht Falls on Concern Intervention Will Slow Gains; Bonds Steady

Thailand’s baht snapped a three-day rally on concern the central bank will intervene to slow an appreciation that hurts exports. Government bonds held steady.

Finance Minister Kittiratt Na-Ranong said Jan. 31 there’s concern a strong baht will hurt tourism and overseas sales. He wrote to the central bank’s board last week suggesting a cut in the policy rate to help reduce inflows. Global funds bought $4.8 billion more sovereign debt than they sold this year through yesterday, official data show. Thailand’s 10-year bonds yield 3.64 percent, compared with 2 percent in the U.S. and 0.78 percent in Japan.

“It’s the intervention concern that is limiting gains in the baht,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “The trend of fund inflows into Asia remains intact, and that will continue to put appreciation pressure on the region’s currencies.”

The baht fell 0.2 percent to 29.78 per dollar as of 3:12 p.m. in Bangkok, according to data compiled by Bloomberg. It touched 29.66 on Jan. 21 and Jan. 31, the strongest level since August 2011.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 40 basis points, or 0.4 percentage point, to 5.27 percent.

Finance Minister Kittiratt said last month that Thailand’s relatively higher benchmark interest rate may also be a cause of the baht’s appreciation. The Southeast Asian nation’s policy rate is 2.75 percent, compared with a maximum of 0.25 percent in the U.S. and 0.1 percent in Japan. The central bank will next meet to review monetary policy on Feb. 20.

The yield on the government’s 3.625 percent bonds maturing in June 2023 held steady at 3.64 percent, data compiled by Bloomberg show.

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