Baht Leads Advance in Southeast Asia as Fed May Delay Rate Rises

Updated on
  • Thailand's 10-year sovereign bond yield falls to one-year low
  • Yellen's remarks on U.S. interest rates the key driver: Mizuho

Thailand’s baht led an advance in Southeast Asian exchange rates as signs the Federal Reserve will delay monetary tightening buoyed demand for emerging-market assets.

Indonesian, Thai and Philippine sovereign bonds advanced following Fed Chair Janet Yellen’s remarks to Congress that further interest-rate increases might be pushed back due to global market turbulence. Higher U.S. borrowing costs reduce the attractiveness of developing-nation assets. A Bloomberg gauge of the greenback versus 10 peers fell to the lowest level since November after Yellen’s comments.

The baht climbed 0.3 percent to 35.253 a dollar as of 4:14 p.m. in Bangkok and reached the strongest level since October earlier, according to data compiled by Bloomberg. The Philippine peso appreciated 0.1 percent to 47.44 and the rupiah closed little changed at 13,465 after rising as much as 0.9 percent in early trading.

“Yellen’s remarks pushing back rate-hike expectations and pushing down the odds of hikes near term appear to be the key driver,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “The rally may not be sustained as nothing has changed dramatically” and the test will be when Chinese markets reopen on Monday after the Lunar New Year holidays, he said.

Bangko Sentral ng Pilipinas held its policy rate at 4 percent on Thursday, as predicted by all 14 economists in a Bloomberg survey.

The yield on Indonesia’s sovereign notes due September 2026 fell five basis points to a nine-month low of 7.95 percent, according to the Inter Dealer Market Association. The yield on similar-maturity Thai securities declined 10 basis points to 2 percent, the lowest since they were sold in February 2015. That on 10-year Philippine paper dropped 15 basis points to 3.90 percent, the least since November.