Baht advances on easing political strife

Thailand’s baht rose this week, after falling in each of the previous two periods, on increased fund inflows as anti-government protesters removed blockades at four main intersections in central Bangkok.

Global funds purchased $175 million more Thai equities than they sold this week through yesterday and poured a net $250 million into bonds, official data show. Consumer confidence fell to the lowest level since November 2001 amid political unrest that began in October, the University of the Thai Chamber of Commerce said yesterday. The currency reached a two-week high today after concern eased that Russia’s incursion into Ukraine will spark a broader conflict.

“Although political problems persist in Thailand, the direction of the situation is at least turning to better from worse and that spurred some inflows of funds and provided support for the baht and Thai assets,” said Koji Fukaya, chief executive officer and currency strategist at FPG Securities Co. in Tokyo. “Easing geopolitical risks in the global market from the Russia-Ukraine situation also helped emerging currencies.”

The baht strengthened 0.9 per cent this week and 0.1 per cent today to 32.272 per dollar as of 9:29am in Bangkok, according to data compiled by Bloomberg. It reached 32.22 earlier, the strongest level since Feb 18. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose six basis points from a week ago and four basis points today to 6.49 per cent.

Credit Ratings

Even as Thailand’s political turmoil weighs on the economy’s growth outlook, the sovereign credit profile remains consistent with its Baa1 rating, the third-lowest investment grade, and stable outlook, Moody’s Investors Service said yesterday in a statement.

The nation’s long-term foreign-currency rating was affirmed at BBB+, also the third-lowest investment ranking, by Fitch Ratings yesterday. Prolonged and more intense political tension could risk protracted economic weakness and erosion of confidence in the market, which could put pressure on sovereign creditworthiness, Fitch said in a statement.

Two-year government bonds were steady this week before a Bank of Thailand meeting on March 12. The central bank will lower the benchmark interest rate to 2 per cent from 2.25 per cent, according to 10 of 15 economists in a Bloomberg News survey. The rest predict no change.

The yield on the 3.125 per cent government bonds due December 2015 was little changed from Feb 28 at 2.27 per cent, data compiled by Bloomberg show. The rate rose one basis point, or 0.01 percentage point, today.

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