Thailand’s baht was set for its biggest weekly advance in a month and sovereign bonds rose as foreigners increased holdings of the nation’s assets after the US ended a budget impasse and averted a debt default.
The currency touched the highest level in almost three weeks after the Senate voted Oct 16 to halt a 16-day government shutdown and raise the US debt limit.
Global funds bought $370 million more Thai debt than they sold yesterday, the biggest one-day net purchase since Sept 20, official data show. They added a net $217 million of local bonds and stocks this week through Thursday.
“The removal of the US default risk added to improving risk sentiment,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Fund inflows are supporting the baht.”
The baht jumped 0.8% from a week ago and was unchanged today at 31.04 per dollar as of 8.43am in Bangkok, according to data compiled by Bloomberg. It touched 30.963 earlier, the strongest level since Sept 23.
One-month implied volatility, a measure of expected moves in exchange rates used to price options, slumped 48 basis points this week to 6.51%. The gauge fell 11 basis points, or 0.11 percentage points, today.
The Bank of Thailand kept its benchmark interest rate unchanged at 2.5% for a third meeting on Oct 16. The central bank said after the decision that it plans to cut its 2013 growth forecast on Oct 25 after trimming it to 4.2 percent from 5.1% in July.
The yield on the 3.625% bonds due June 2023 declined five basis points from Oct. 11 and one basis point today to 3.85%, data compiled by Bloomberg show.