Baht Rises on Speculation Faster Growth Will Spur More Inflows

Thailand’s baht advanced, halting a two-week loss, on speculation accelerating growth will attract investment to Southeast Asia’s second-largest economy.

Gross domestic product rose a record 18.9 percent last quarter, taking 2012’s rate to 6.4 percent, official data showed Feb. 18. That was more than the annual rate of 6.23 percent in Indonesia, the nation’s bigger neighbor in terms of GDP. Overseas funds bought $1.9 billion more sovereign notes than they sold in February, according to the Thai Bond Market Association, while 10-year debt yields fell four basis points this week to 3.61 percent.

“The economy is very strong and it’s natural to see appreciation pressure on the baht,” said Koji Fukaya, president of Office Fukaya, a currency research and consulting company in Tokyo. “From time to time, authorities may have to step in to the market just to slow the pace of appreciation.”

The baht strengthened 0.1 percent today and this week to 29.84 per dollar as of 3:07 p.m. in Bangkok, according to data compiled by Bloomberg. The currency has climbed 2.5 percent in 2013, the best performance in Asia.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped eight basis points to 5.25 percent, the lowest level in a month. The measure fell 18 basis points, or 0.18 percentage point, this week.

The Bank of Thailand said it will closely monitor capital inflows and take action if needed after keeping its policy rate unchanged at 2.75 percent on Feb. 20. The baht has moved in line with regional peers in recent weeks and the bank hasn’t intervened during that time, Bank of Thailand Governor Prasarn Trairatvorakul said today.

Government data next week may show exports, which account for about two-thirds of the nation’s economy, increased 13 percent in January and imports jumped 19 percent, according to the median estimate of economists in a Bloomberg survey. Overseas sales rose 13.5 percent in December and inbound shipments gained 4.7 percent.

The yield on the 3.625 percent government bonds due June 2023 dropped one basis point today, data compiled by Bloomberg show. Thai debt returned 0.3 percent this year, beating 0.2 percent in Indonesia, indexes compiled by HSBC Holdings Plc show.

Before it's here, it's on the Bloomberg Terminal.