Baht Weakens Most in Three Months on Fed Minutes; Bonds Decline

Thailand’s baht weakened by the most in more than three months, paring a weekly gain, after minutes of a Federal Reserve meeting indicated the monetary authority will probably end its bond-buying program in 2013.

Fed members were divided between a mid- or end-of-year finish to the debt purchases that have helped boost demand for riskier assets, according to the minutes of last month’s meeting released yesterday in Washington. The baht touched a 10-month high yesterday as foreign funds bought $36 million more local stocks than they sold this week, exchange data show.

“The Fed minutes determined the baht movement and gave some support to the dollar in other Asian markets as well,” said Kozo Hasegawa, a foreign-exchange trader in Bangkok at Sumitomo Mitsui Banking Corp. “Funds will continue to pour into Thailand and I don’t think this trend will reverse too soon.”

The baht dropped 0.4 percent to 30.48 per dollar in Bangkok in the biggest decline since Sept. 24, according to data compiled by Bloomberg. Today’s loss cut this week’s gain to 0.4 percent. It rose as high as 30.29 yesterday.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose five basis points to 4.11 percent, the highest level since Dec. 17. It climbed 20 basis points, or 0.2 percentage point, for the week.

Government bonds completed a weekly loss as official data released Jan. 2 showed inflation accelerated to a 13-month high of 3.6 percent in December. The Bank of Thailand will keep its benchmark interest rate at 2.75 percent at its Jan. 9 meeting, according to all 15 economists surveyed by Bloomberg.

The yield on the 3.875 percent notes due June 2019 rose 11 basis points to 3.34 percent from a week ago, according to data compiled by Bloomberg. The yield added three basis points today.

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