Baht Snaps Two-Day Loss as Stock Gains Encourage Risk-Taking

Thailand’s baht snapped a two-day drop as gains in U.S. stocks improved risk sentiment, boosting demand for emerging-market assets. Government bonds held steady.

U.S. equities rose yesterday, with the Dow Jones Industrial Average closing within 40 points of a record, amid optimism the Federal Reserve will continue to provide monetary stimulus. Global funds bought $9.7 million more Thai equities than they sold yesterday, bringing in a net $118 million this month, exchange data show. Official reports last week showed the nation’s exports rose 16 percent in January and imports climbed 41 percent, resulting in a trade deficit of $5.5 billion.

“Gains in U.S. stocks overnight brought the risk-on sentiment today, encouraging fund inflows into emerging markets,” said Tsutomu Soma, fixed-income business unit manager at Rakuten Securities Inc. in Tokyo. “The baht remains steady as demand for the currency and the dollar seems to be quite well balanced.”

The baht rose 0.1 percent to 29.79 per dollar as of 3:06 p.m. in Bangkok, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose seven basis points, or 0.07 percentage point, to 5.13 percent.

An ample supply of liquidity and the global economic recovery will continue to increase pressure on the baht and boost inflows into Asia, said Chalitrat Chandrubeksa, a deputy government spokesman, citing a report from the state-planning agency, the National Economic and Social Development Board.

Investors should sell the baht as its trade performance “isn’t pretty,” JPMorgan Chase & Co. said in a report dated March 1 and released late yesterday. “The dollar-baht is well placed to correct higher in the face of any generalized de-risking in Asia,” according to the report.

Federal Reserve Vice Chairman Janet Yellen said yesterday the U.S. central bank should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the unprecedented program.

The yield on Thailand’s 3.625 percent government notes due June 2023 was little changed at 3.63 percent, data compiled by Bloomberg show.

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