The baht rose by the most in two weeks on speculation policy makers will tolerate currency gains to counter inflation. Government bonds were steady.
Deputy Prime Minister Finance Minister Kittiratt Na-Ranong said last week the central bank should avoid fighting market forces to stem baht appreciation. International investors bought US$3.7 billion more local sovereign debt than they sold this month through yesterday and poured a net $487 million into equities, official data show. Inflation accelerated to 3.63% in December, the fastest in 13 months, government figures showed Jan 2.
"The baht has received support from the perception that Thai authorities are more amenable to currency appreciation," said Sacha Tihanyi, senior foreign-exchange strategist at Scotiabank in Hong Kong. "This has helped encourage portfolio flows. Domestic economic conditions may cause price pressures, while baht gains can help contain imported inflation."
The baht climbed 0.4%, the biggest gain since Jan 16, to 29.85 per dollar as of 8.23am in Bangkok, according to data compiled by Bloomberg. It has advanced 2.5% this year, the most among Asia's 11 major currencies.
One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell three basis points, or 0.03 percentage point, to 5.42%.
The yield on the 3.125% government bonds due December 2015 was little changed at 2.94%, data compiled by Bloomberg show.