Baht Drops From 16-Year High on Intervention Risk; Bonds Decline

Thailand’s baht fell from a 16-year high on concern the central bank will intervene to slow gains that may hurt exports. The government’s 10-year bonds fell for the first time in eight days.

Bank of Thailand Governor Prasarn Trairatvorakul said yesterday the baht gains were “excessive,” though added that special measures to stem fund inflows weren’t necessary as yet. The dollar’s 14-day relative strength index against the baht stayed below the 30 threshold for a third day, a sign that the greenback is oversold. The baht has strengthened 1.1 percent this week, the biggest advance among 25 emerging-market currencies tracked by Bloomberg.

“Even though the central bank seems to be quite tolerant with the baht’s gains, it doesn’t mean it won’t step in, especially since the baht has risen so much in such a short time,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “In the short term, we may see some technical correction too. But the basic trend of fund inflows and currency gains will continue.”

The baht slid 0.3 percent to 29.20 per dollar as of 3:08 p.m. in Bangkok, according to data compiled by Bloomberg. It touched 29.08 yesterday, the strongest level since July 1997.

Global funds purchased $2.5 billion more sovereign debt than they sold this month after putting in a net $2.7 billion in February and $3.7 billion in January, Thai Bond Market Association data show.

Interest Rates

Finance Minister Kittiratt Na-Ranong said today there is no need for short-term measures to curb the baht’s appreciation while adding he wants the currency to weaken and the rate to be reduced. He consistently called for a lower benchmark interest rate, saying the higher borrowing costs attract fund inflows.

The nation’s policy rate of 2.75 percent compares with a maximum of 0.25 percent in the U.S. and 0.1 percent in Japan. It is still lower than Indonesia’s 5.75 percent, the Philippines’ 3.5 percent and Malaysia’s 3 percent.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, slumped 13 basis points, or 0.13 percentage point, to 4.95 percent.

The yield on Thailand’s 3.625 percent bonds due June 2023 rose one basis point to 3.59 percent, data compiled by Bloomberg show. The rate dropped for seven days through yesterday, the longest streak since Feb. 8. It touched 3.58 percent yesterday, the lowest level since Feb. 11.

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