Baht Advances to 16-Year High on Bond Inflows, Exporter Demand

Thailand’s baht rose to a 16-year high, reversing an earlier drop, after international investors boosted holdings of local bonds and on speculation exporters will convert their overseas earnings.

The currency fell as much as 0.2 percent earlier on concern the central bank will seek to slow gains that threaten exports. Global funds poured a net $1.6 billion into Thai sovereign debt this month through yesterday, adding to net purchases of $9.7 billion in the first quarter, official data show. The rising baht will pressure the government’s export growth target of 8 percent to 9 percent this year, Finance Minister Kittiratt Na-Ranong said today, adding he sees no need to use measures to curb speculation in the currency.

“Continued fund inflows into bonds put pressure on the baht to appreciate,” said Pareena Phuangsiri, a Bangkok-based analyst at Kasikornbank Pcl. “Exporters may also want to buy the baht on any declines.”

The baht climbed 0.2 percent to 28.78 per dollar as of 4:07 p.m. in Bangkok, according to data compiled by Bloomberg. It touched 28.75 earlier, the highest level since a devaluation in July 1997 that sparked the Asian financial crisis. The baht has appreciated 6.3 percent this year, the most among Asia’s 11 major currencies.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose one basis point, or 0.01 percentage point, to 5.31 percent.

Japanese Investors

Bank of Japan board member Ryuzo Miyao said today that he expects investors based in the world’s third-largest economy to buy more foreign bonds. Japanese money managers boosted ownership of Thai baht-denominated notes by 26 percent in the first quarter of this year to 24.4 billion yen ($248 million), according to data from the Investment Trusts Association of Japan.

The Bank of Thailand sold 35 billion baht ($1.2 billion) of bonds due 2015 at yields from 2.813 percent to 2.814 percent at an auction today.

The yield on the 3.625 percent government bonds due June 2023 fell one basis point to 3.37 percent, the lowest level since August, according to data compiled by Bloomberg.

“Fund inflows from abroad are supporting bonds,” said Tsutomu Soma, manager of Rakuten Securities Inc.’s fixed-income business unit department in Tokyo. “Investors are also betting on the currency-appreciation prospect.”