Baht set for fifth weekly gain

Thailand’s baht was headed for a fifth weekly gain, its longest winning streak in more than a year, as overseas investors pumped US$2 billion into the local bond market in the last four days.

The currency strengthened 0.8% from a week ago to 31.876 per dollar as of 9.39am in Bangkok, data compiled by Bloomberg show. It declined 0.1% today. Global investors have been net buyers of Thai debt on each of the last 20 days, boosting their holdings by $5.3 billion in that time, according to figures from the Thai Bond Market Association. They also pumped $700 million into Thai equities during the period.

“Large money inflows in the domestic bond market have accelerated the baht’s strengthening,” Kampon Adireksombat, an economist at Tisco Securities Co. in Bangkok, said by phone. “Most investors are very optimistic about the Thai economic outlook from the government’s investment policies.”

Thailand’s economy, which shrank in the first quarter, can return to growth rates of between 5% and 6% as the military government’s policies help “jump-start” expansion, Pridiyathorn Devakula, a former finance minister and an adviser to junta leader Prayuth Chan-Ocha, said on July 21. On July 15, the National Council for Peace and Order, a group of military leaders, approved a budget starting Oct 1 with a 2% increase in investment in infrastructure projects.

The yield on sovereign bonds due April 2024 fell six basis points, or 0.06 percentage point, this week to 3.77%, according to data compiled by Bloomberg. It dropped to a two- month low of 3.68% on July 22.

Reversal Signal

The baht may retreat to between 32.50 and 33 per dollar by the end of this year as the pickup in domestic demand is likely to fall short of market expectations, Tisco’s Kampon said. The baht’s 14-day relative strength index was 29, holding for a fifth day below the 30 level that suggests to some traders that the currency is poised to weaken.

Thailand’s military leaders on July 22 delayed a decision on the transport ministry’s infrastructure investment plan to next week. The government said last month it plans to spend 2.4 trillion baht ($75 billion) to build and expand networks such as highways, railways and airports between 2015 and 2022.

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