Baht gains on spending pledge

KUALA LUMPUR — The baht was the best-performing Asian currency this week as Thailand’s junta pledged to boost spending to revive economic growth. Indonesia’s rupiah led losses after the country reported a surprise trade deficit.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, was steady for the week, erasing a decline after the European Central Bank cut interest rates to negative on Thursday, potentially spurring fund flows to emerging-market assets. Thailand’s military administration, which took over in a May 22 coup, promised to step up infrastructure development and increase investment in areas adjacent to the nation’s borders.

“The perception is that the new Thailand government has provided stability and improved conditions for growth,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. The ECB’s stimulus programme is “positive for high-yielding currencies such as those in Asia,” he said.

The baht appreciated 0.9% this week, the most since February, to 32.560 per dollar as of 3.36pm in Bangkok on Friday, according to data compiled by Bloomberg. The Philippine peso rose 0.2% to 43.65, while the rupiah fell 1.3% to 11,834 and Malaysia’s ringgit declined 0.1% to 3.2150.

Foreign funds pumped $523 million baht into Thai stocks and local-currency sovereign bonds in the first four days of the week, exchange data show. The junta plans to speed up investment in a dual-track train project and promote economic development zones near borders with Malaysia, Myanmar and Laos, ACM Prajin Juntong, the head of economic affairs, told reporters in Bangkok on June 1.

Stocks rally

The ECB became the first major monetary authority to use negative deposit rates to spur consumption, and said it would offer liquidity to lenders to boost credit growth. The euro rose against the greenback after the announcement and the MSCI Asia Pacific Index of shares headed for its highest close since October on Friday.

Inflation in the Philippines accelerated to 4.5% in May, the fastest since 2011 and exceeding the median forecast of economists surveyed by Bloomberg for a rate of 4.2%, data showed on Thursday. That spurred speculation the central bank will raise borrowing costs at its June 19 meeting.

The rupiah had a third weekly drop after Indonesian authorities reported a $1.96-billion trade deficit in April, the biggest shortfall in nine months. The current-account gap may almost double this quarter from the previous period, central bank Governor Agus Martowardojo said in Jakarta yesterday.

‘Rupiah weakness’

“Our view is for more rupiah weakness against the dollar,’ said Mika Martumpal, treasury research and strategy head at PT Bank CIMB Niaga in Jakarta. ‘‘We still see current-account deficit narrowing from 2013, but the second quarter will prove to be a challenging time.’’

Elsewhere in Asia, India’s rupee slipped 0.1% this week to 59.185 per dollar and China’s yuan declined 0.05% to 6.2502. Taiwan’s dollar retreated 0.1% to T$30.08, while South Korea’s won was little changed at 1,020.45 through Thursday, with financial markets in the country closed on Friday for a public holiday. The Vietnamese dong dropped 0.1% to 21,185.

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