Baht Set for Biggest Two-Day Gain Since 2013 on Rate Decisions

  • Ten-year bond yield falls the most this year as inflows return
  • Official says BOT interest rate close to lowest possible level

The baht was set for its biggest two-day gain since 2013 as investors returned to the nation’s assets following decisions by the Thai and U.S. central banks to keep interest rates unchanged, maintaining the yield advantage of local bonds.

Overseas funds bought a net $78 million of Thai corporate and sovereign notes in the four days through Thursday, ending three weeks of outflows. They also poured $70 million into equities, data compiled by Bloomberg show. The Bank of Thailand kept borrowing costs on hold on Sept. 16 after the government chose to boost spending through an economic stimulus package as two rate cuts this year failed to revive growth. Futures indicate diminished odds for monetary tightening by the Federal Reserve this year.

“The delay by the Fed will offer some international investors an opportunity to buy assets in Thailand and other emerging markets,” said Pimonwan Mahujchariyawong, an economist at Kasikorn Research Co. in Bangkok. “Still, the baht’s long-term outlook remains on the weak side with higher U.S. interest rates on the horizon.”

The local currency halted a 10-week losing streak, rising 1.5 percent to 35.494 a dollar as of 3:54 p.m. in Bangkok, according to data compiled by Bloomberg. It gained 0.7 percent on Friday after a similar advance on Thursday. The baht has declined 4.8 percent this quarter, trailing losses in Malaysia’s ringgit and the Indonesian rupiah. Thailand’s 10-year government bond pays 2.80 percent, compared with 2.17 percent for similar-maturity U.S. Treasuries.

Thailand’s current benchmark interest rate of 1.5 percent is close to its lowest possible level, Deputy Governor Pongpen Ruengvirayuth said Aug. 28.
The central bank wants the baht to move in line with emerging-market currencies, Assistant Governor Mathee Supapongse said after announcing this week’s rate decision.

The 10-year sovereign bond yield fell 32 basis points this week, the biggest decline since December, data compiled by Bloomberg show. Futures show 18 percent odds for an October rate increase by the Fed and 44 percent at its last meeting of 2015 in December.

For Related News and Information:
Thailand Holds Key Rate as Government Focuses on Stimulus
Thai baht information portal: FXIP THB

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