Baht Falls on Concern Central Bank Will Intervene to Slow Gains

Thailand’s baht dropped for the first time in more than a week amid concern the central bank will intervene to slow the pace of appreciation that may hurt exports. Government bonds were little changed.

The currency has advanced 5.3 percent this year, the best performance in Asia, and gained beyond 29 per dollar this week for the first time since 1997. Bank of Thailand Governor Prasarn Trairatvorakul said yesterday that Prime Minister Yingluck Shinawatra has voiced concern about the strength of the baht and its impact on exporters, and said the central bank will closely monitor the moves. The Bank of Japan last week announced 7.5 trillion yen ($75 billion) of bond buying a month.

“Amid continued appreciation pressure on the Asian currencies, the baht’s gains are stalled for now with some concerns about intervention,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “With monetary easing by central banks in developed nations, funds are flowing into the bonds in the region where currency appreciation is expected.”

The baht fell 0.1 percent to 29.03 per dollar as of 3:09 p.m. in Bangkok, according to data compiled by Bloomberg. It touched 28.88 yesterday, the strongest level since a devaluation in July 1997 that sparked the Asian financial crisis. One-month implied volatility for the baht, a measure of expected moves in the exchange rate used to price options, dropped three basis points, or 0.03 percentage point, to 5.3 percent.

Global funds bought $1.1 billion more Thai sovereign debt than they sold this month through yesterday, taking this year’s net purchases to $11 billion, according to Thai Bond Market Association data. That compares with $31 billion of inflows in the whole of 2012.

The Finance Ministry is not considering tax measures to discourage fund inflows, Somchai Sujjapongse, director-general of Fiscal Policy Office, told reporters in Bangkok today, adding that the central bank has other measures to manage the currency.

The yield on the 3.625 percent government bonds June 2023 was little changed at 3.44 percent, the lowest level since Nov. 5, data compiled by Bloomberg show.

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