Baht Rises to Eight-Month High as Growth Outlook Lures Inflows

The baht climbed to an eight-month high and sovereign bonds rose as global funds bought Thai assets on optimism government spending will revive growth.

The currency rose as much as 0.3 percent to 31.822 per dollar, the strongest since Nov. 25, before trading at 31.859 at 3:24 p.m. in Bangkok. The baht’s 1.8 percent advance in July is the second best among 24 emerging-market exchange rates tracked by Bloomberg. The gains pushed a measure of investor bullishness on the currency to the highest in more than a year.

Thailand’s economy, which shrank in the first quarter, can return to growth rates of between 5 and 6 percent as the military government’s policies help “jump-start” expansion, Pridiyathorn Devakula, a former finance minister and an adviser to junta leader Prayuth Chan-Ocha, said yesterday. Exports rose 7.2 percent last month from a year earlier, the first increase in four months, Prayuth said July 18.

“It seems that the junta is at least providing some stability for the economic outlook,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “Measures of consumer and business confidence have been tracking higher, so that’s probably giving the market a bit more confidence.”

An index of consumer confidence rose to 75.1 in June, the highest since October, according to a July 3 release from the University of the Thai Chamber of Commerce.

The yield on the 3.875 percent government bonds due June 2019 slipped two basis points, 0.02 percentage point, to 3.01 percent, the lowest level since May 21.

State Spending

The baht gained 2.2 percent since the May 22 military coup amid a pickup in fund inflows into Thai stocks and bonds as the junta accelerated state spending to spur the economy. Five-year government bond yields dropped four basis points in the period.

The local currency’s 14-day relative strength index is at 22.6, the lowest since April 2013, according to Bloomberg data, suggesting an imminent reversal.

“The baht’s current strength should be short term” as investors wait for signals from the Federal Reserve on the prospects for U.S. interest rates, Benjarong Suwankiri, economist at TMB Bank Pcl, told reporters today. He expects the baht to weaken to about 32.50 per dollar later this year.

Global investors poured a net $331.6 million into Thai debt and equities yesterday, taking this month’s inflows to $3.31 billion, according to a data compiled by Bloomberg.

The benchmark SET Index of shares closed yesterday at the highest level since June 2013. The gauge dropped 1 percent today, headed for its biggest decline since June 18.

The National Council for Peace and Order, a group of military leaders, will consider the transport ministry’s infrastructure investment plan today, Soithip Trisuddhi, the ministry’s permanent secretary, said yesterday without giving details. The government said last month it plans to spend 2.4 trillion baht ($75 billion) to build and expand networks such as highways, railways and airports between 2015 and 2022.

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