Baht Retreats From 16-Month High Amid Intervention Concern

Thailand’s baht retreated from a 16-month high amid concern the central bank will intervene to slow gains that hurt exports. Government bonds advanced.

The currency touched its strongest level since September 2011 as global investors bought $1.6 billion more of sovereign notes than they sold this month through Jan. 11, and poured a net $172 million into local equities, stock exchange and Thai Bond Market Association data show. The central bank will monitor capital flows, it said on Jan. 9 after holding its benchmark interest rate unchanged at 2.75 percent.

“Funds are coming in and the baht has been strengthening,” said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl. “The baht may move on the stronger side as inflows will probably continue, but there is concern about central bank action in the market, capping the baht’s upside.”

The baht traded at 30.27 per dollar as of 3:10 p.m. in Bangkok, unchanged from Jan. 11, after reaching 30.14 earlier, the strongest level since Sept. 14, 2011, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, declined two basis points, or 0.02 percentage point, to 4.08 percent.

Exports, which account for about two-thirds of Southeast Asia’s second-largest economy, climbed 27 percent in November after a 14 percent increase the previous month, a central bank report showed on Dec. 28.

Bank of Thailand Governor Prasarn Trairatvorakul said today that the central bank will only take action if the baht ceases to move in line with its fundamentals. The central bank isn’t concerned by the baht’s strength, he said.

The yield on the 3.125 percent government bonds due December 2015 fell two basis points to 2.95 percent, data compiled by Bloomberg show.

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