Thai Baht Declines to One-Week Low on Intervention Speculation

Thailand’s baht dropped to a one-week low on speculation the central bank will seek to slow currency gains that threaten exports. Government bonds fell.

The currency declined for a second day after Bank of Thailand Governor Prasarn Trairatvorakul said last week that volatile capital flows are the main threat to growth this year. The central bank will use its tools if needed to allay such risks, he said, adding it needs to assess the baht’s impact on the real economy. Global funds poured more than $4 billion into Thai bonds and stocks this month, boosting the local currency to a 17-month high on Jan. 21, official data show.

“The baht has risen quite fast this month and the central bank may have entered to slow the pace of appreciation, although they probably won’t try to reverse the trend,” said Tsutomu Soma, manager of the investment trust and fixed-income business unit at Rakuten Securities Inc. in Tokyo. “The trend of fund inflows to Asia’s emerging markets will continue and that means continued appreciation pressure on currencies.”

The baht slid 0.2 percent to 29.97 per dollar as of 3:08 p.m. in Bangkok after touching 29.99 earlier, the weakest level since Jan. 17, according to data compiled by Bloomberg. It has advanced 2 percent this year, the most after India’s rupee among Asia’s 11 major currencies.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, climbed 20 basis points, or 0.2 percentage point, to 5 percent, the highest level in more than two months.

Industrial output rose 23.4 percent in December, after a revised gain of 82.3 percent in November, according to official data today. The median forecast in a Bloomberg survey was for a 32.3 percent increase.

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

Before it's here, it's on the Bloomberg Terminal.