Thai Baht, Bonds Advance on Speculation of More Fund Inflows

Thailand’s baht advanced for a third day and government bonds rose on speculation an improving economy will spur capital inflows.

Global investors purchased $311 million more sovereign debt than they sold yesterday, boosting their holdings by the most since Jan. 16, and were net buyers of $29 million of stocks, official data show. The yen’s 6.7 percent decline this year versus the dollar, which dragged some Asian currencies such as South Korea’s won lower, may help boost Japanese companies’ profits, allowing them to increase investment in Thailand, according to Tsutomu Soma at Rakuten Securities Inc.

“Fund inflows are supporting the baht,” said Soma, manager of the investment trust and fixed-income business unit at Rakuten in Tokyo. “Yet risk of intervention prevails, limiting gains.”

The baht strengthened 0.1 percent to 29.75 per dollar as of 3:01 p.m. in Bangkok and touched 29.71, within 0.2 percent of its 17-month high of 29.66 reached on Jan. 21 and Jan. 31, according to data compiled by Bloomberg.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell five basis points, or 0.05 percentage point, to 5.27 percent.

The Bank of Thailand raised its 2013 growth forecast last month to 4.9 percent from an October estimate of 4.6 percent.

Finance Minister Kittiratt Na-Ranong said on Jan. 31 that there’s concern the strong baht will hurt tourism and exports. Overseas shipments, which account for about two-thirds of Southeast Asia’s second-largest economy, rose 14 percent in December after a 27 percent increase the previous month, a Bank of Thailand report showed on Jan. 31.

The yield on the government’s 3.625 percent bonds maturing in June 2023 declined two basis points to 3.65 percent, the lowest level in a month, data compiled by Bloomberg show.

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