Thailand’s baht dropped the most in more than a week on speculation the central bank will cut interest rates next week to slow fund inflows that helped fuel a 2.3 percent rally in the currency this year. Bonds fell.
Finance Minister Kittiratt Na-Ranong said Jan. 25 that lower borrowing costs would discourage inflows into the country, urging the central bank to employ measures to prevent the baht from rising or falling sharply. There’s concern the strong baht will hurt tourism and exports, he said Jan. 31. The Bank of Thailand will review interest rates on Feb. 20.
“There’s some pressure from the Thai government on the central bank to cut interest rates next week,” said Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp. in Bangkok. “Still, because of the Chinese New Year holidays, trading is quiet.”
The baht fell 0.2 percent to 29.89 per dollar as of 3:18 p.m. in Bangkok, the biggest decline since Jan. 31, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged at 5.47 percent.
Global investors bought $1.2 billion more local sovereign notes than they sold this month through Feb. 8, Thai Bond Market Association data show. Overseas shipments, which account for about two-thirds of Southeast Asia’s second-largest economy, rose 14 percent in December after a 27 percent increase the previous month, official data showed on Jan. 31.
The yield on the 3.625 percent government bonds due June 2023 added one basis point, or 0.01 percentage point, to 3.58 percent, data compiled by Bloomberg show.