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Baht Rises as U.S. Stock Surge Boosts Risk-Taking; Bonds Decline

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March 6 (Bloomberg) -- Thailand’s baht rose for a second day as gains in U.S. equities and economic indicators boosted risk sentiment and brightened the outlook for Asian exports.

The Dow Jones Industrial Average surged to a record yesterday and a report showed service industries in the U.S. expanded in February at the fastest pace in a year as a recovery in housing rippled through the economy. Confidence among American households rose in February, a consumer sentiment survey showed March 1. The U.S. is Thailand’s second-largest export market along with Japan, purchasing 9.9 percent of the total shipments in January, official data show.

“Continued gains in U.S. stocks encourage investors to take risks and put more funds into the emerging markets,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “We have seen strong U.S. data recently, which is also good for Asian exports.”

The baht rose 0.3 percent, the most since Jan. 30, to 29.71 per dollar as of 3:08 p.m. in Bangkok, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, held steady at 5.12 percent.

Ample supply of liquidity and the global economic recovery will boost inflows into Asia and increase pressure on the baht to appreciate, Chalitrat Chandrubeksa, a deputy government spokesman said yesterday, citing a report from the state-planning agency, the National Economic and Social Development Board.

The Institute for Supply Management’s non-manufacturing index, which covers about 90 percent of the U.S. economy, increased to 56 last month from 55.2 in January, compared with the median forecast in a Bloomberg survey of a reading of 55. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 77.6 from 73.8 in January.

Inflation-Linkers

The yield on Thailand’s 3.625 percent government notes due June 2023 rose two basis points, or 0.02 percentage point, to 3.65 percent, the highest level since Feb. 15, data compiled by Bloomberg show.

Investors ordered three times the amount of bonds on offer in Thailand’s second sale of inflation-linked debt, the finance ministry said. The ministry allocated 60 percent of the 40 billion baht ($1.3 billion) of 15-year debt to overseas investors and the rest to the local funds, it said in a statement. They were priced at 1.25 percent, compared with an indicative range of 1.25 percent and 1.40 percent.

“Strong demand reflects higher expectations for inflation,” Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB, said in an interview today. “Improving risk sentiment could keep encouraging fund inflows into the emerging markets. Added to this would be quicker economic activity, which means inflation expectation could also rise.”

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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