Thai Baht Has Best Month Since July 2011 on Capital Inflows

Thailand’s baht had the biggest monthly advance since July 2011 as international investors increased holdings of the nation’s assets, while the central bank upgraded its economic growth forecast.

The currency touched a 17-month high in January as global funds pumped more than $4.3 billion into sovereign debt and equities, official data show. The Bank of Thailand said on Jan. 18 that gross domestic product will increase 4.9 percent in 2013, compared with an October estimate of 4.6 percent, citing rising exports, domestic consumption and investment.

“Amid risk-on sentiment in the market, funds have been coming to the region,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “In addition, Thailand’s relatively stronger economic condition attracts more funds, putting appreciation pressure on the baht.”

The baht strengthened 2.6 percent in January, the second-best performance after India’s rupee among Asia’s 11 most-active currencies. It fell 0.2 percent to 29.81 per dollar today as of 3:29 p.m. in Bangkok, according to data compiled by Bloomberg.

The currency touched 29.66 earlier, matching the level reached on Jan. 21 that was the strongest since August 2011. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 149 basis points, or 1.49 percentage points, to 5.4 percent this month. It dropped seven basis points today.

A central bank report today showed Southeast Asia’s second-largest economy posted a current-account surplus of $730 million in December after an excess of $392 million the previous month. Overseas shipments rose 14 percent after an increase of 27 percent in November. Exports contracted in seven of the first nine months of last year.

Government bonds fell this month even after investors added to their holdings. The yield on the 3.625 percent notes maturing in June 2023 rose 18 basis points to 3.72 percent, data compiled by Bloomberg show. The rate dropped two basis points today.

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