The baht halted a 10-week loss as investors returned to the nation’s assets following decisions by the Thai and US central banks to keep interest rates unchanged, maintaining the yield advantage of local bonds.
Overseas funds bought a net US$78 million of Thai corporate and sovereign notes in the four days through Thursday, ending three weeks of outflows. They also poured $70 million into equities, data compiled by Bloomberg show.
The Bank of Thailand kept borrowing costs on hold on Wednesday after the government chose to boost spending through an economic stimulus package as two rate cuts this year failed to revive growth. Futures indicate diminished odds for monetary tightening by the Federal Reserve this year.
Central bank governor Prasarn Trairatvorakul saw no big impact from the Fed’s much-anticipated decision to hold its benchmark rate at near zero and warned uncertainty remained.
“The Fed's decision will have no severe impact or cause fluctuations in the monetary market because market conditions remain the same. There's no u-turn in these factors,” he said.
Mr Prasarn said it was only a matter of time before the Fed did it.
Analysts view the delay as an opportunity to snap up equities.
“The delay by the Fed will offer some international investors an opportunity to buy assets in Thailand and other emerging markets,” said Pimonwan Mahujchariyawong, an economist at Kasikorn Research Co in Bangkok. “Still, the baht’s long-term outlook remains on the weak side with higher US interest rates on the horizon.”
The local currency climbed 0.7% this week to 35.785 a dollar as of 10.33am Friday in Bangkok, according to data compiled by Bloomberg. It fell 0.1% on Friday and is down 5.5% this quarter, trailing losses in Malaysia’s ringgit and the Indonesian rupiah. The 10-year government bond pays 2.83%, compared with 2.19% for similar-maturity US Treasuries.
Thailand’s current benchmark interest rate of 1.5% is close to its lowest possible level, deputy governor Pongpen Ruengvirayuth said Aug 28. The central bank wants the baht to move in line with emerging- market currencies, assistant governor Mathee Supapongse said after announcing this week’s rate decision.
The 10-year sovereign bond yield fell 29 basis points this week, the biggest decline since December, data compiled by Bloomberg show. Futures show 17% odds for an October rate increase by the Fed and 44% at its last meeting of 2015 in December.