Baht is Trading Close to 2-Week Low

The major currency of Thailand, Baht is trading close to a 2-week low figure amid concerns that the Central Bank may take attempts for curbing appreciation, thereby threatening exports. Thailand bonds, as a result, have gained. Baht has been the best performing currency among the major Asian ones for 2013 and since 31st December; it has gained around 4.1%. On last month, it touched a 16-year high figure too.

As stated by the Finance Minister of the country, Kittiratt Na-Ranong, the appreciation of Baht played a major role in causing the 5.8% decline in the exports for February. On the other hand, the Managing Director of the International Monetary Fund, Christine Lagarde stated that the fund has decided to contribute around 1 billion Euros as part of the Financial Rescue Program for Cyprus.

According to the Researcher at the Japan Center for Economic Research, Hideki Hayashi, the concern on a possible intervention is increasing as Baht has come quite far, while export is still a very important part of the country’s economy. Hideki added that the debt concern of Europe is not wiped out completely and this is providing some excuse for a correction in Baht.

From its yesterday figure, Baht changed pretty little and is at 29.38 per USD at this point of time (It was at 29.37 per USD on yesterday). At one point of time on yesterday, Baht even reached 29.48, marking its weakest level since 19th March. The 1-month implied volatility of Thailand declined by 7 basis points and is currently at 5.15%. Incidentally, implied volatility measures the expected moves in the exchange rate used for pricing options.

The Bank of Thailand and Kittiratt, on yesterday, stated that the policy makers are currently monitoring the capital flows and also the exchange rate. Based on the recently released official data, Government bonds increased as the same showed that global funds purchased $175 million more sovereign debt than what they sold in the first 3 days of the current week. This has added to the net purchases of $9.6 billion in the 1st quarter of the year.

The yield on the 3.625% Thailand notes which are due by June, 2023 experienced a decline of 2 basis points and is currently at 3.52%. This marks the lowest level for the same since 28th March. In 2013, it has averaged at 3.63%.