Baht Climbs to 10-Month High on Growth, U.S. Budget; Bonds Drop

Thailand’s baht reached the strongest level in 10 months on signs regional economic growth is gaining traction and after U.S. lawmakers passed a budget plan to avert automatic tax increases and spending cuts.

The currency added to a 3.1 percent gain in 2012 after reports showed Singapore’s economy expanded more than economists estimated last quarter and China’s manufacturing expanded for a third month in December. Thailand’s Finance Ministry said on Dec. 26 the nation’s gross domestic product will expand 5.7 percent in 2012, versus an earlier forecast of 5.5 percent, as exports recover.

“The Thai economy is doing well on domestic consumption and exports should pick up in 2013,” said Kampon Adireksombat, a senior economist in Bangkok at Tisco Securities Co. The passage of the U.S. budget bill “will support capital inflows and lift the baht higher,” he said.

The baht rallied 0.7 percent to 30.38 per dollar in Bangkok from 30.60 on Dec. 28, a level not seen since February, according to data compiled by Bloomberg. The currency may advance to 30 by the end of 2013, Adireksombat said.

The U.S. House of Representatives passed a bill today undoing income tax increases for more than 99 percent of households, even as lawmakers will decide later on spending cuts in exchange for raising the debt ceiling.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped to 3.81 percent from 3.91 percent on Dec. 28. It fell 261 basis points, or 2.61 percentage points, in 2012.

Bonds declined after the government said inflation accelerated last month. The yield on the 3.875 percent government bonds due June 2019 rose six basis points to 3.29 percent, data compiled by Bloomberg show. It declined five basis points last year.

Consumer prices in Southeast Asia’s second-largest economy probably rose 3.63 percent in December from a year earlier, compared with 2.74 percent in November, the commerce ministry said today. Economists had expected a 3.2 percent gain, according to the median forecast in a Bloomberg News survey.

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