Baht, Bonds Have Weekly Gains as Growth Optimism Boosts Inflows

Thailand’s baht and government bonds had weekly gains as overseas investors bought debt securities on optimism the Southeast Asian nation’s economy is improving.

Global funds bought $92 million more sovereign bonds than they sold this week through yesterday, Thai Bond Market Association data show. The central bank said yesterday exports increased 14 percent in December and the country posted a current-account surplus of $730 million. The baht rebounded from a one-week low of 30.01 per dollar reached on Jan. 28 amid speculation exporters are repatriating proceeds to take advantage of the currency’s decline.

“The trend of fund inflows into Thailand remains intact,” said Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp. in Bangkok. “There seems to be some exporter demand for the baht near the 30” per dollar level, he said.

The baht strengthened 0.3 percent this week to 29.81 as of 3:08 p.m. in Bangkok and reached 29.66 yesterday, matching the Jan. 21 level that was its strongest since August 2011, according to data compiled by Bloomberg. It was little changed today.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 70 basis points, or 0.7 percentage point, to 5.5 percent from a week ago. It rose 10 basis points today.

Finance Minister Kittiratt Na-Ranong said yesterday people are concerned the strong baht may hurt tourism and exports. The Bank of Thailand should take into consideration that the country’s relatively higher benchmark interest rate may also be a cause of the baht’s recent strength, he added. The minister had said last week the central bank should avoid fighting market forces to stem currency gains.

Thailand’s policy rate is 2.75 percent, compared with a maximum of 0.25 percent in the U.S. and 0.1 percent in Japan.

Inflation slowed in January as a stronger baht made imports cheaper and state subsidies countered higher costs of food and fuel. An index of consumer prices rose 3.39 percent from a year earlier, the Ministry of Commerce said today, compared with a previously reported 3.63 percent increase in December.

The yield on the 3.625 percent notes maturing in June 2023 declined two basis points this week and today to 3.7 percent, data compiled by Bloomberg show.