Thai Baht Has Biggest Weekly Gain Since April on Fund Inflows

Thailand’s baht had its best week in five months as foreign investors increased their holdings of the nation’s assets amid optimism that a global economic recovery is brightening the outlook for Asian exports.

The currency touched its strongest level in more than three weeks as exchange data show global funds bought $310 million more Thai equities than they sold in the first four days of this week, set for their biggest weekly net purchase since November. U.S. retail sales rose 0.5 percent in August after a 0.2 percent gain in July, according to a Bloomberg survey of economists before data due today. The Federal Reserve may cut its monthly bond purchases by $10 billion at its Sept. 17-18 policy meeting, a separate survey showed.

“We saw quite a sharp appreciation in the baht because of the inflows,” said Pareena Phuangsiri, a Bangkok-based analyst at Kasikornbank Pcl. “But gains will probably be short-lived and we have been recommending exporters wait” to buy the baht, she added.

The baht jumped 1.1 percent this week, the most since the five-day period ended April 19, to 31.88 per dollar as of 3:35 p.m. in Bangkok, according to data compiled by Bloomberg. The currency fell 0.4 percent today and earlier reached 31.58, the strongest level since Aug. 20.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 34 basis points, or 0.34 percentage point, to 8.04 percent this week. The gauge increased five basis points today.

Bond Inflows

Overseas investors poured a net $381 million into Thai debt this week through yesterday, according to the Thai Bond Market Association.

Downward pressure on the baht will persist over the next few months given the prospect of the Fed’s tapering, and until confirmation of an improvement in Thailand’s balance of payments in the third quarter, Goldman Sachs Group Inc. said in a research note yesterday. The bank sees the currency at 33 per dollar in three months, weaker than its previous forecast of 31.3.

The yield on Thailand’s 3.625 percent sovereign bonds due June 2023 declined three basis points from a week ago to 4.37 percent, data compiled by Bloomberg show. The rate rose one basis point today.

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