Thai Baht Rises to Two-Week High After Yingluck Dissolves House

Thailand’s baht rose to a two-week high after Prime Minister Yingluck Shinawatra dissolved parliament to defuse anti-government protests that are now in their second month in Bangkok.

Protest leader Suthep Thaugsuban repeated a call for Yingluck and her ministers to resign within three days or face renewed anti-government demonstrations. No rallies have been planned in Bangkok today. The dollar’s 14-day relative strength index versus the baht dropped to 63 from as high as 81 last week. A level above 70 suggests to some traders the Southeast Asian currency was oversold and poised to change direction.

The baht climbed 0.1 percent to 32.069 per dollar as of 3:23 p.m. in Bangkok from Dec. 9, according to data compiled by Bloomberg. The currency reached 31.95 earlier, the strongest level since Nov. 25, and has rallied 0.7 percent in a week. Onshore markets were closed yesterday for a public holiday

“The baht got some boost as the tension eased in the very short term due to the dissolution of parliament,” said Toru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “The baht was also in the oversold area and, technically, it was about time to see some rebound. But gains may be limited as uncertainties surrounding Thai politics are still lingering.”

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined 24 basis points, or 0.24 percentage point, to 6.56 percent.

Growth Risks

Thailand’s king endorsed the dissolution of parliament, and elections will be held on Feb. 2, according to a royal decree.

The current pullback in the dollar against the baht is a good opportunity to accumulate a position to bet on the Southeast Asian currency’s decline, Nomura Holdings Inc. Singapore-based strategists Craig Chan and Wee Choon Teo said in a research note yesterday, citing the risks to growth from the deteriorating political situation. The economy grew 2.7 percent in the third quarter from a year earlier, the slowest pace since the first three months of 2012, official data show.

The yield on the 3.625 percent bonds due June 2023 fell three basis points from Dec. 9 to 3.99 percent, data compiled by Bloomberg show. The government sold 8 billion baht ($250 million) of notes due 2061 and 20 billion baht of securities maturing 2019 today.

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