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Baht Gains to Three-Week High on Capital Inflows; Bonds Steady

Sept. 12 (Bloomberg) -- Thailand’s baht climbed to a three-week high as overseas investors added to their holdings of the nation’s assets on optimism China’s economy is gaining traction.

The baht advanced for a fifth day, the longest winning streak in almost eight months, after global funds boosted holdings of Thai stocks by more than $100 million on each of the last two days, the biggest net purchases since June 28. Chinese Premier Li Keqiang said yesterday that Asia’s largest economy can achieve its main targets this year, bolstering the outlook for Thai exports to its biggest market.

“Risk sentiment is improving and funds are flowing into the nation, supporting the baht,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “But I see this as a temporary rally in a weak market environment.”

The baht appreciated 0.8 percent to 31.74 per dollar as of 3:44 p.m. in Bangkok, the biggest gain in almost three weeks, according to data compiled by Bloomberg. It reached 31.625 earlier, the strongest level since Aug. 21. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, jumped 17 basis points to 7.93 percent.

Foreigners turned net buyers of Thai debt yesterday for the first time in a week, purchasing 7.5 billion baht, the most since July 30, according to the Thai Bond Market Association.

China’s export growth accelerated to 7.2 percent in August from 5.1 percent the previous month, and industrial production grew 10.4 percent following a gain of 9.7 percent, official reports showed the past week. The nation bought 11.4 percent of Thai goods shipped overseas in the first seven months.

Baht gains accelerated on speculation automatic orders to buy the currency were triggered near 31.80 per dollar, in addition to demand from exporters, Disawat Tiaowvanich, a currency trader at Bangkok Bank Pcl, said in an interview.

The yield on Thailand’s 3.625 percent sovereign bonds due June 2023 was little changed at 4.37 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: James Regan at jregan19@bloomberg.net

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