Rupee Leads Monthly Gain in Asia Currencies; Baht Slumps on Coup

India’s rupee led the biggest monthly gain in Asian currencies since October on optimism the new administration will implement reforms to spur growth in the region’s third-largest economy. The Thai baht slumped.

The rupee rose to a one-year high in May as global funds added to holdings of the nation’s assets after the Bharatiya Janata Party won with the biggest majority in 30 years. The baht headed for its worst month of 2014 after a military coup left the country without an elected prime minister. Overseas investors bought $3.2 billion more bonds than they sold in India and South Korea in May, while they sold $1 billion of Thai debt, the latest exchange data show.

“Asian currencies have been largely supported by renewed capital inflows,” said Callum Henderson, global head of foreign-exchange research at Standard Chartered Plc in Singapore. “The Indian rupee is the ongoing story of the election win and the prospects for reform.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed 0.4 percent in May to 115.79 and touched the highest level in five months on May 21. The Bloomberg Emerging Market Local Sovereign Index gained 2.5 percent in its best monthly performance since September.

The rupee appreciated 2.1 percent for the month to 59.1025 per dollar, according to data compiled by Bloomberg. The Philippine peso strengthened 2 percent to 43.750, Malaysia’s ringgit climbed 1.6 percent to 3.2130 and South Korea’s won rose 1.3 percent to 1,020.20.

Thai Politics

Barclays Plc boosted its one-month forecast for India’s rupee to 58 per dollar from 60 earlier to reflect the voting result and said central bank intervention will merely “limit the pace of rupee appreciation,” Singapore-based strategist Hamish Pepper wrote in a May 28 client note.

The peso posted its biggest monthly gain since September after Standard & Poor’s raised the nation’s long-term investment-grade rating by one level to BBB from BBB-. The economy grew 5.7 percent from a year earlier in the first quarter, exceeding the median 6.4 percent forecast of economists in a Bloomberg News survey, data showed May 29.

Thailand’s baht retreated 1.5 percent in May to 32.849 per dollar after the military seized power on May 22 following months of political unrest that caused the ouster of then-Prime Minister Yingluck Shinawatra. A return of civilian rule soon is “impossible” because the threat of further violence means it can’t guarantee an election would be free and fair, Lt. Gen. Chatchalerm Chalermsukh said May 29 at a briefing in Bangkok.

Indonesia Elections

The baht fell to 32.844 yesterday, the weakest level since February, and was the third-worst performing emerging-market currency in May among the 24 tracked by Bloomberg.

“We still don’t know when elections will be held and there remains concern about how the situation will develop,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. “That will weigh on the baht.”

Indonesia’s rupiah declined for a second month amid approaching national elections scheduled for July. The Golkar party, which came second in April’s parliamentary vote, joined a coalition headed by presidential candidate Prabowo Subianto of Gerindra. The move could complicate the task for frontrunner Joko Widodo who tapped former vice president Jusuf Kalla as his running mate for the presidential ballot on July 9.

The currency fell 1 percent to 11,675 per dollar for the month, according to data compiled by Bloomberg. Elsewhere in Asia, Taiwan’s dollar climbed 0.7 percent to NT$30.050 and China’s yuan strengthened 0.2 percent to 6.2473. The Vietnamese dong retreated 0.3 percent to 21,158.

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