Baht Advances a Second Day on Optimism Capital Inflows Will Rise

Thailand’s baht rose for a second day on optimism the nation’s improving economy and relatively high bond yields will draw overseas capital.

The currency appreciated 2.7 percent this month, the second-best exchange-rate performance in Asia after India’s rupee, as international investors poured more than $4 billion into local stocks and sovereign bonds, official data show. The Bank of Thailand raised its 2013 growth forecast on Jan. 18 to 4.9 percent from an October estimate of 4.6 percent. Benchmark 10-year government notes pay 3.72 percent in Thailand, compared with 2.01 percent in the U.S. and 0.77 percent in Japan.

“Investors have been pouring money into Asia where yields are higher and economic conditions are solid, contributing to appreciation pressures on currencies,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Domestic demand in Thailand may lead to some inflationary pressure and there’s speculation the central bank is a bit more accommodative to currency gains to help curb inflation.”

The baht climbed 0.2 percent to 29.79 per dollar as of 3:12 p.m. in Bangkok, according to data compiled by Bloomberg. It touched 29.66 on Jan. 21, the strongest since August 2011. One-month implied volatility, a measure of expected moves in exchange rates used to price options, held steady at 5.47 percent.

Inflation accelerated to 3.63 percent in December, the fastest in 13 months, government figures showed Jan. 2. Finance Minister Kittiratt Na-Ranong said last week the central bank should avoid fighting market forces to stem currency gains.

The yield on the 5.125 percent government bonds due March 2018 was little changed at 3.3 percent, data compiled by Bloomberg show.

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