Baht Rises Most Since 2007 as Bonds Gain After Fed

Thailand’s baht rose the most in six years, while stocks and government bonds climbed after the Federal Reserve unexpectedly refrained from cutting monetary stimulus that has spurred demand for emerging-market assets.

The baht jumped 2.2 percent, the most since January 2007, to 30.98 per dollar as of 4:40 p.m. in Bangkok, according to data compiled by Bloomberg. It reached 30.915 earlier, the strongest level since July 24. The SET Index rose 3.5 percent to 1,489.06, its highest close since July 24. Yields on 10-year government bonds fell 20 basis points, the most since June 14, to 4.03 percent.

“There is a big rebound in reaction to the Fed,” said Pareena Phuangsiri, a Bangkok-based analyst at Kasikornbank Pcl. “I would say it’s very dovish. But even though the Fed didn’t taper this time” they will do so eventually, she said.

Stocks rose around the world and emerging-market currencies strengthened after the Federal Open Market Committee said yesterday it wants to see more evidence of a recovery in the world’s largest economy before starting to taper its $85 billion a month of bond purchases. Economists surveyed by Bloomberg had forecast a $5 billion reduction.

Fed Chairman Ben S. Bernanke said paring stimulus could still start this year should data confirm the Fed’s “basic outlook.” The U.S. will release jobless claims and existing home sales reports today.

Bank of Thailand Governor Prasarn Trairatvorakul told reporters today the central bank is closely monitoring the baht and would step in if the move was excessive.

Capital Outflows

The baht is still 3.5 percent weaker versus the dollar since May 22, when Bernanke first signaled that policy makers could reduce the bond purchases, triggering capital outflows and a selloff in emerging markets. More than $50 billion has left global funds investing in emerging-market bonds and stocks since May, extending the outflow this year to $11 billion, according to data from EPFR Global.

The SET tumbled 23 percent from its May 21 high through Aug. 28, before rebounding 17 percent. The Fed’s decision will spur inflows from overseas funds, boosting share prices of banking, telecommunication, property and consumer-related companies, Maybank Kim Eng Securities (Thailand) Pcl, the nation’s largest brokerage, said in a report today.

Bangkok Bank Pcl, the largest lender, gained 2.9 percent to a four-month high. Advanced Info Service Pcl, the biggest mobile-phone operator, climbed 3 percent. Land & Houses Pcl, the No. 1 property developer, surged 12 percent, the most in two years.

Global funds bought $432 million more Thai equities than they sold this month through yesterday and pumped a net $884 million into government bonds, official data show.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 39 basis points to 7.6 percent.

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