Baht gains on US Fed-induced inflows
The baht gained for a second day before the Bank of Thailand’s interest-rate meeting as speculation the US Federal Reserve will keep rates low for an extended period boosted demand for emerging-market assets.
The Thai central bank will hold borrowing costs at 2% today, according to all 21 economists surveyed by Bloomberg on Wednesday ahead of the decision at 2.30pm.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, fell the most since June yesterday as the Fed started its two-day policy meeting.
“The baht is more stable along with other regional currencies as concern about an increase in US interest rates eases,” said Thammarat Kittisiripat, an analyst at TMB Bank Plc. “The central bank will maintain the benchmark interest rate at this low level for the rest of this year as the domestic economy still has a very slow recovery.”
The baht rose 0.1% to 32.214 per dollar as of 9.45am in Bangkok after earlier climbing as much as 0.2% to 32.184, data compiled by Bloomberg show. The currency advanced 0.1% on Tuesday, halting a six-day run of losses.
One-month implied volatility, a measure of expected exchange-rate swings used to price options, was little changed at 4.96%, data compiled by Bloomberg show. The gauge has climbed 15 basis points this week.
Overseas investors bought a net US$37.7 million of the nation’s debt and equities on Tuesday, according to data from the stock exchange and Thai Bond Market Association.
The economy will improve next quarter and the government will focus on boosting exports and increasing the value of products, Prime Minister Prayuth Chan-Ocha, who is also the junta leader, said Tuesday after a weekly Cabinet meeting. The appointed National Legislative Assembly also passed a budget bill calling for 2.575 trillion baht ($80 billion) in total spending for the fiscal year starting Oct. 1.
Government bonds of two, five and 10 years were little changed before the rate decision. The yield on the 5.4% notes due in July 2016 was at 2.48%, data compiled by Bloomberg show. The yield fell seven basis points, or 0.07 percentage point, in the past three weeks. It reached 2.46% on Sept 12, the lowest level since June 20.