Thailand’s Baht Halts Five Weekly Rally on Intervention Risk

Thailand’s baht snapped a five-week rally on concern the central bank will curb exchange-rate gains to protect exporters.

Recent appreciation in the currency, which reached the strongest level since 1997 on March 20, has been “excessive,” Bank of Thailand Governor Prasarn Trairatvorakul said on March 20. The nation’s exports may increase 9 percent this year, lower than the prior forecast of 10.5 percent, the finance ministry said today in a statement. The baht also weakened amid speculation local units of companies based in Japan, the biggest foreign investor in Thailand, will repatriate profits before the Japanese fiscal year ends March 31.

“After a sharp appreciation last week and with concerns expressed by authorities, there was speculation about possible intervention,” said Kozo Hasegawa, a foreign-exchange trader in Bangkok at Sumitomo Mitsui Banking Corp. “There have been some corporate flows in the past few days as we approach the fiscal year-end for Japan.”

The baht weakened to 29.29 per dollar as of 3:28 p.m. in Bangkok from 29.28 a week ago, according to data compiled by Bloomberg. That is the first five-day decline since the period ended Feb. 15. The currency reached 29.08 on March 20, the strongest level since a 1997 devaluation sparked the Asian financial crisis. It has strengthened 1.6 percent this month, the most in Asia.

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, rose six basis points to 5.13 percent from a week ago. The rate was unchanged today.

Exports Fall

A government report yesterday showed exports decreased 5.8 percent in February while imports climbed 5.3 percent, resulting in a trade deficit of $1.6 billion, a fifth straight monthly shortfall. Kyoichi Tanada, president of Toyota Motor Corp.’s Thai subsidiary, said this week the firm may ask the Southeast Asian nation’s government for assistance if the baht continues to appreciate, adding that an exchange rate of 29 per dollar would be a “problem.”

The broader measure of the current-account turned to a surplus of $1.6 billion last month from a deficit of $2.2 billion in January, according to central bank data today.

The baht may average 29.4 per dollar in 2013 compared with 31.1 last year, the finance ministry’s statement also said today. The ministry also raised a 2013 growth forecast to 5.3 percent from its earlier prediction of 5 percent. Gross domestic product expanded 6.4 percent in 2012.

The yield on the government’s 3.625 percent bonds due June 2023 fell two basis points to 3.52 percent from a week ago, according to data compiled by Bloomberg. The rate, which rose six basis points today, reached 3.46 percent yesterday, the lowest level since Nov. 6.

Global funds bought $3.2 billion more local sovereign debt than they sold this month, adding to net purchases of $6.4 billion in the first two months of this year, according to data from the Thai Bond Market Association. Money managers based abroad bought $233 million more local equities than they sold this month through yesterday, exchange data show.

“The fund inflows are quite big and that put downward pressure on local yields,” Hasegawa said.

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