Thailand’s baht dropped toward a two-week low on concern the central bank will seek to curb appreciation that threatens exports. Bonds advanced.
The baht, Asia's best-performing currency this year, rose 3.9% since Dec 31 and touched a 16-year high last month.
February's 5.8% decline in exports was partly caused by exchange-rate strength, Finance Minister Kittiratt Na-Ranong said on Wednesday in Brunei.
The International Monetary Fund will contribute about one billion euros (US$1.3 billion) as part of a financial rescue program for Cyprus, IMF Managing Director Christine Lagarde said on Wednesday.
“Concern about intervention seems to be growing as the baht has come quite far while export is an important part of the Thai economy,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Europe's debt concern is not completely wiped out, and that’s providing some excuse for a correction in the baht.”
The baht declined 0.2% to 29.42 per dollar as of 9.05am in Bangkok, according to data compiled by Bloomberg. The currency reached 29.48 Wednesday, the weakest level since March 19. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped five basis points, or 0.05 percentage point, to 5.17%.
Mr Kittiratt and the Bank of Thailand said that policy makers are monitoring capital flows and the exchange rate.
Government bonds advanced as official data showed global funds purchased $175 million more local sovereign debt than they sold in the first three days of this week, adding to net purchases of $9.6 billion in the first quarter.
The yield on Thailand's 3.625% notes due June 2023 fell one basis point to 3.53%, according to data compiled by Bloomberg. It has averaged 3.63% this year.
"Inflows into the bond market are quite large and provide support for the baht," Mr Hayashi said.