Baht Rises to 16-Month High on Bets Central Bank Will Allow Gain

Thailand’s baht climbed to a 16-month high on speculation the central bank will allow gains to counter inflation. Government bonds rose for a second day.

The currency rose for a seventh day, the longest winning stretch since March 2011, after Bank of Thailand Governor Prasarn Trairatvorakul said yesterday the monetary authority won’t intervene in the market as long as the baht moves in line with fundamentals. Inflation accelerated to the fastest pace in 13 months in December, official data show. A stronger baht would help slow price gains by cutting import costs.

“Given the concern over inflation, investors probably believe authorities won’t guide the currency lower, although they may seek to slow the pace of appreciation,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “The baht is rising with other Asian currencies as we are in a risk-on mood with easing concern about fiscal and debt problems in the U.S. and Europe.”

The baht jumped 0.5 percent to 30.09 per dollar as of 3:10 p.m. in Bangkok and touched 30.05 earlier, the strongest level since Sept. 9, 2011, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose four basis points, or 0.04 percentage point, to 4.15 percent.

Appreciation in the local currency is driven by an improvement in global investor confidence, Prasarn said. Global funds purchased $1.6 billion more Thai sovereign securities than they sold this month through yesterday and poured a net $237 million into equities, according to figures from the stock exchange and Thai Bond Market Association.

The yield on the 3.125 percent government bonds due December 2015 fell one basis point to 2.94 percent, data compiled by Bloomberg show.

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