Baht Rises Most in Six Weeks, Bonds Gain as Yields Draw Funds

Thailand’s baht rose the most in six weeks and government bonds advanced after overseas investors boosted their holdings of the nation’s debt, drawn by yields that are relatively high compared with developed nations.

The currency climbed to the strongest level in 19 months after global funds bought $156 million more sovereign notes than they sold yesterday, the biggest net purchases this month, Thai Bond Market Association data show. Prime Minister Yingluck Shinawatra said yesterday the government is targeting an annual growth rate of 4 percent to 5 percent over the long term. The economy grew 6.4 percent in 2012, official data show.

The baht rose 0.3 percent to 29.63 per dollar as of 3:10 p.m. in Bangkok, the biggest advance since Jan. 30, data compiled by Bloomberg show. The currency touched 29.57, the strongest level since August 2011, and has gained 3.2 percent this year, the most in Asia. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, held steady at 5.22 percent.

“Funds are flowing into Thailand and that put appreciation pressure on the baht,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “The authorities seem to be tolerant of gains so far.”

The baht climbed by as much as 0.5 percent after it breached a recent psychological support level of around 29.65, according to Nalin Chutchotitham, a Bangkok-based analyst at Kasikornbank Pcl. Prior to today, the baht’s strongest level this year was 29.66 reached on Jan. 21 and Jan. 31.

More Easing

Asian currencies were supported after Kikuo Iwata, the nominee for the deputy governor of the Bank of Japan, said today decisive monetary easing is needed.

“Generally, the move up among the Asian currencies is led by speculation of more liquidity coming in from Japan in addition to the U.S.,” Kasikornbank’s Nalin said.

Thailand’s benchmark 10-year bond yields 3.65 percent, compared with 2.05 percent for similar-maturity U.S. Treasuries and 0.64 percent in Japan. Bank of Thailand Deputy Governor Pongpen Ruengvirayudh said last week the monetary authority is seeking to encourage outflows to ease pressure on the baht.

The yield on Thailand’s 3.625 percent government notes due June 2023 declined one basis point, or 0.01 percentage point, to 3.65 percent, according to data compiled by Bloomberg. The rate was 3.66 percent yesterday, near the 3.663 percent reached on March 7 that was the highest level since Feb. 4.

“When the yields rose, it provided a good buying opportunity for investors seeking better returns,” Dai-Ichi’s Nishihama said.

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