Baht rises to 2-week high

Thailand's baht rose to a two-week high after Prime Minister Yingluck Shinawatra dissolved parliament to defuse anti-government protests that are now in their second month in Bangkok.

Protest leader Suthep Thaugsuban repeated a call for Yingluck and her ministers to resign within three days or face renewed anti-government demonstrations. No rallies have been planned in Bangkok on Wednesday. The United States dollar's 14-day relative strength index versus the baht dropped to 57 from as high as 81 last week. A level above 70 suggests to some traders the Southeast Asian currency was oversold and poised to change direction.

The baht climbed 0.3% to 31.985 per dollar as of 9.32am in Bangkok from Dec 9, according to data compiled by Bloomberg. The currency reached 31.95 earlier, the strongest level since Nov 25, and has rallied 0.9% in a week. Onshore markets were closed on Tuesday for a public holiday.

"The baht got some boost as the tension eased in the very short term due to the dissolution of parliament," said Toru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc in Tokyo. "The baht was also in the oversold area and, technically, it was about time to see some rebound. But gains may be limited as uncertainties surrounding Thai politics are still lingering."

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined three basis points, or 0.03 percentage point, to 6.78%.

Growth Risks

His Majesty the King endorsed the dissolution of parliament, and elections will be held on Feb 2, according to a royal decree.

The current pullback in the dollar against the baht is a good opportunity to accumulate a position to bet on the Southeast Asian currency's decline, Nomura Holdings Inc. Singapore-based strategists Craig Chan and Wee Choon Teo said in a research note on Tuesday, citing the risks to growth from the deteriorating political situation. The economy grew 2.7% in the third quarter from a year earlier, the slowest pace since the first three months of 2012, official data show.

The yield on the 3.625% bonds due June 2023 was little changed at 4.01%, data compiled by Bloomberg show. The government will auction 8 billion baht ($250 million) of notes due 2061 and 20 billion baht of securities maturing 2019 at 10am local time.

Share your thoughts

Discussion 1 : 11/12/2013 at 01:44 PM
The Baht has only risen because the BoT is buying it to keep the Baht at artificially inflated levels. I just wonder what their logic is for doing this?

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