Baht Gains as Concern About Fund Curbs Eases; Bonds Erase Losses

Thailand’s baht rose and government bonds erased an earlier decline as Finance Minister Kittiratt Na-Ranong said the currency is now more stable, easing concern policy makers will act to stem gains.

Benchmark debt due 2023 fell earlier after the Bangkok Post reported today, citing Kittiratt, that the Bank of Thailand is seeking to curb fund inflows into the fixed-income market and slow currency gains. The finance minister said last week he was “disappointed” policy makers didn’t cut interest rates after an April 30 meeting, even as he urged them to do so after the baht climbed to a 16-year high.

“With growing sensitivity to the risk of measures to control inflows, the market fluctuates based on comments from officials,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “Some investors may think a rate cut is possible if they don’t impose any measures. Personally, I don’t think the central bank will cut rates.”

The baht appreciated 0.2 percent from May 3 to 29.65 per dollar as of 3:32 p.m. in Bangkok, according to data compiled by Bloomberg. Onshore financial markets were closed yesterday for a public holiday. It advanced 3.1 percent this year, the best performance among Asia’s 11 most-traded currencies, and reached 28.56 on April 22 and April 19, the strongest since July 1997.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 13 basis points, or 0.13 percentage point, to 6.25 percent.

Foreign Investment

The government should limit overseas investment in domestic bonds to maturities of less than six months, Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Organizations, a trade group, said on May 3.

Foreign investors sold $123 million more sovereign debt than they bought this month through May 3 after net purchases of $12 billion in the first four months of the year, according to Thai Bond Market Association data.

The yield on the 3.625 percent debt due June 2023 was little changed at 3.38 percent. The one-year interest-rate swap rate, the fixed cost needed to receive a floating payment, held steady at 2.3 percent.

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