The Thai baht pulled back from a 16-year high as a technical indicator signaled a possible rebound in the dollar and amid concern the central bank will intervene to slow the currency's gains. Government bonds rose.
The baht climbed to the strongest level since 1997 on Wednesday as official data showed global funds poured a net US$1.6 billion into sovereign debt this month through on Wednesday. The dollar's 14-day relative strength index was 26 against the baht, below the 30 threshold that suggests to some traders that the greenback's recent decline was excessive. Bank of Thailand Assistant Governor Paiboon Kittisrikangwan said on April 12 that the monetary authority will monitor capital inflows and the baht, which has risen "faster than expected."
"Today's move is probably just a correction after reaching a high, and due to some concern about intervention,” said Tsutomu Soma, manager of Rakuten Securities Inc's fixed-income business unit in Tokyo. "Clearly, the trend remains for the baht to strengthen on fund inflows."
The currency weakened 0.1% to 28.87 per dollar as of 8.58am in Bangkok, according to data compiled by Bloomberg. It touched 28.80 on Wednesday, the highest level since a devaluation in July 1997 that sparked the Asian financial crisis. The baht has appreciated 6 percent this year, the most among Asia's 11 major currencies.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell two basis points, or 0.02 percentage point, to 5.28%.
International investors bought $9.7 billion more Thai government bonds than they sold in the first quarter, data from the Thai Bond Market Association show.
The yield on the 3.625% government bonds due June 2023 fell one basis point to 3.37%, the lowest level since August, according to data compiled by Bloomberg.
"Fund inflows from abroad are supporting bonds," Rakuten's Soma said. "Investors are also betting on the currency appreciation prospect."