Baht Erases Losses as Thailand Rules Out Use of Capital Controls

Thailand’s baht erased earlier losses after the central bank said it isn’t considering imposing capital controls. Government bonds declined.

Increased overseas investment by local companies and private machinery imports have provided “counter-capital inflows,” Bank of Thailand Deputy Governor Pongpen Ruengvirayudh said today in an interview in Bangkok, adding that a stronger baht is not always a “bad thing.” The currency fell as much as 0.4 percent earlier amid speculation local importers will increase dollar purchases to take advantage of the baht’s rally to a five-week high yesterday.

The baht was unchanged from yesterday at 29.73 per dollar as of 3:51 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, dropped four basis points, or 0.04 percentage point, to 5.16 percent.

“Comments suggesting gains in the baht may be tolerated will help encourage more inflows,” said Koji Fukaya, chief executive officer and currency strategist of FPG Securities Co. in Tokyo. “Thailand’s economy is relatively stronger and the baht may continue to see appreciation pressure.”

Shipments from abroad jumped 41 percent in January, while exports rose 16 percent, resulting in a trade deficit of $5.5 billion, according to the latest official figures.

The yield on Thailand’s 3.625 percent government notes due June 2023 rose two basis points to 3.66 percent, the highest level since Feb. 4, data compiled by Bloomberg show.

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