Baht Rises on Bets Policy Makers Will Allow Gains to Cap Prices

Thailand’s baht rose the most in two weeks on speculation policy makers will tolerate currency gains to counter inflation. Government bonds fell for a second day.

Finance Minister Kittiratt Na-Ranong said last week the central bank should avoid fighting market forces to stem baht appreciation. International investors bought $3.7 billion more local sovereign debt than they sold this month through yesterday and poured a net $487 million into equities, official data show. Inflation accelerated to 3.63 percent in December, the fastest in 13 months, government figures showed Jan. 2.

“The baht has received support from the perception that Thai authorities are more amenable to currency appreciation,” said Sacha Tihanyi, senior foreign-exchange strategist at Scotiabank in Hong Kong. “This has helped encourage portfolio flows. Domestic economic conditions may cause price pressures, while baht gains can help contain imported inflation.”

The baht climbed 0.5 percent, the biggest gain since Jan. 16, to 29.84 per dollar as of 3:12 p.m. in Bangkok, according to data compiled by Bloomberg. It has advanced 2.5 percent this year, the most among Asia’s 11 major currencies.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose three basis points, or 0.03 percentage point, to 5.47 percent.

The yield on the 5.125 percent government bonds due March 2018 rose one basis point to 3.3 percent, data compiled by Bloomberg show.

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