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Baht Advances for a Second Day as German Data Boosts Risk Taking

Feb. 20 (Bloomberg) -- Thailand’s baht rose for a second day after stronger-than-estimated German data and gains in global stocks improved risk appetite. Bonds were little changed after the central bank kept interest rates on hold.

The ZEW Center for European Economic Research said yesterday German investor confidence climbed to the highest in almost three years. Europe is Thailand’s fourth-largest export market after purchasing 8.5 percent of total shipments last year, official data show. Global funds bought $1.7 billion more sovereign debt than they sold in February, according to the Thai Bond Market Association.

“With gains in global equities and a strong ZEW result, risk sentiment is better supported,” said Sacha Tihanyi, senior foreign-exchange strategist at Scotiabank in Hong Kong. “Conditions remain supportive for continued inflows for the time being.”

The baht added 0.2 percent to 29.82 per dollar as of 3:03 p.m. in Bangkok, data compiled by Bloomberg show. The currency has strengthened 2.5 percent this year, the best performance in Asia. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped eight basis points, or 0.08 percentage point, to 5.25 percent.

Fund Inflows

The Bank of Thailand left borrowing costs at 2.75 percent today, as expected by 17 of 20 economists surveyed by Bloomberg. Three had predicted a quarter of a percentage point reduction. The bank said after the decision that it will monitor capital flows closely and will take action on inflows if needed.

“We will probably continue to see fund inflows putting appreciation pressure on the baht for the time being,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “It’s possible the central bank will take measures, including intervention, to ease such appreciation pressure if necessary.”

The German index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 48.2 in February from 31.5 in January. Economists forecast a gain to 35, according to the median of 38 estimates in a Bloomberg News survey. The Standard & Poor’s 500 Index of U.S. equities rose to a five-year high yesterday.

The yield on the 3.625 percent Thai government bonds due June 2023 was at 3.61 percent, data compiled by Bloomberg show.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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