Baht falls from 5-week high

Thailand's baht fell from a five-week high on speculation importers increased dollar purchases to take advantage of a more favorable exchange rate. Government bonds declined.

The currency touched 29.68 per US dollar on Wednesday, the strongest level since Jan 31, after a rally in the US stocks helped improve demand for riskier assets. Shipments from abroad jumped 41% in January, while exports rose 16%, resulting in a trade deficit of $5.5 billion, according to the latest official figures.

The baht near its recent high is probably a "good level for importers to buy dollars", said Kozo Hasegawa, a foreign- exchange trader in Bangkok at Sumitomo Mitsui Banking Corp. "From the trade balance-perspective, there’s room for two-way movements in the baht."

The baht weakened 0.2% to 29.79 per dollar as of 8.33am in Bangkok, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose two basis points, or 0.02 percentage point, to 5.21%.

The yield on Thailand's 3.625% government notes due June 2023 rose one basis point to 3.66%, the highest level since Feb 4, data compiled by Bloomberg show. The one- year onshore interest-rate swap, the fixed cost needed to receive a floating payment, rose one basis point to 2.72%.

Thai fixed-income markets are too bearish after pricing in the most monetary tightening in Asia even as core inflation slowed, Arup Ghosh, a Singapore-based hedge fund strategist at Citicorp Investment Bank, wrote in a note.

Investors should receive fixed rates in five-year swaps, he recommended, entering into such trades at 3.4% and targeting 3.2% and 3%. The rate rose one basis point today to 3.35%.

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Writer: Bloomberg News
Position: News agency