Thailand's baht traded near a 17- month high as speculation mounts that the central bank will intervene to halt appreciation that hurts exports.
Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said on Jan 17 that the exchange rate is "not at a good level" and exporters will face difficulties should it strengthen further. Bank of Thailand Governor Prasarn Trairatvorakul said the same day that capital inflows to short-term securities were driving the currency higher and the central bank is "closely watching" the situation. The dollar's 14-day relative-strength index against the baht dropped to 17 on Monday, below the 30 threshold that signals to some traders the Thai currency's gains will reverse.
The baht traded at 29.74 per US dollar as of 8.45am in Bangkok compared with its Jan 18 close of 29.73, according to data compiled by Bloomberg. The currency touched 29.69 earlier, the strongest level since Aug 2011. The 10-day gain through Jan. 18 was the longest winning streak since Dec 2008.
"Investors and traders are concerned about intervention with the baht at this level," said Tsutomu Soma, manager of the investment trust and fixed-income business unit at Rakuten Securities Inc in Tokyo. "It has risen quite fast and so much, therefore some investors may want to lock in profits. We may see some correction, though the baht’s upward trend remains intact."
One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell two basis points, or 0.02 percentage point, to 4.30%.
Exports account for about two-thirds of Southeast Asia's second-largest economy. A stronger baht makes Thai goods more expensive for overseas buyers. A government report later this month may show shipments from Thailand increased 21% in December after a gain of 27% the previous month, according to the median estimate of economists in a Bloomberg survey.
The yield on the 3.125% government bonds due December 2015 was little changed at 2.93%, data compiled by Bloomberg show.