Baht surges to 16-month high
Speculators bet on no specific action to halt rise
At close to 30 per US dollar, the baht has climbed to a 16-month high on speculation that the Thai authorities will not rein in the exchange-rate spike.
Traders expect the currency to touch 29 per dollar in the coming period due to continued capital inflow.
Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong yesterday said that neither the Finance Ministry nor the Bank of Thailand planned specific action to tackle the unit's appreciation.
He said the government would rather promote direct overseas investment by Thai companies and investment in financial products for overseas investment.
The government has supported the private sector in its importation of capital products, he said, adding that these imports could raise demand for foreign currencies and, in part, help prevent the baht's excessive appreciation.
Kittiratt also gave an assurance that the government would rely on domestic financing for the Bt2.27-trillion seven-year infrastructure investment plan, to help suck out excess liquidity and limit the baht's appreciation.
"The Finance Ministry and the central bank will [via these various measures] help stabilise the baht and prevent it from excessive appreciation that could hurt Thai exports," he said.
The baht rose yesterday for a seventh straight trading day, the longest winning stretch since March 2011, as the authorities promised no intervention as long as the currency moved in line with fundamentals.
With inflation accelerating to the fastest pace in 13 months in December, a stronger baht would help slow price gains by cutting import costs.
"Given the concern over inflation, investors probably believe the authorities won't guide the currency lower, although they may seek to slow the pace of appreciation," Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank in Tokyo, told Bloomberg. "The baht is rising with other Asian currencies as we are in a risk-on mood with easing concern about fiscal and debt problems in the US and Europe."
The baht had jumped 0.5 per cent to 30.09 per dollar as of 3.10pm in Bangkok, having touched 30.05 earlier, the strongest level since September 9, 2011, according to data compiled by Bloomberg.
Alisara Mahasandana, Bank of Thailand senior director for the Financial Markets Department, said there was no concern over the baht as it had moved in the same direction as its regional peers.
Its appreciation resulted from the weakening US dollar and capital inflow for investment in the Thai stock and bond markets, she said.
Under the central bank's Master Plan for Capital Movement, the monetary authority will continue its rule relaxation to support Thai investors increasing their overseas investment, she added.
Since the end of last year, the currency has strengthened by 1.5 per cent, similar to other regional currencies.
South Korea's won has appreciated by 1.51 per cent, Malaysia's ringgit by 1.68 per cent and the Philippines' peso by 1.18 per cent. Standard Chartered Bank (Thai) senior economist Usara Wilaipich said the baht's strengthening, as a result of the capital flowing into Southeast Asian countries, could be temporary.
She does not expect the unit to appreciate beyond 29.75 per dollar. "The baht was relatively stable for the past four to five months. The fast appreciation of the baht may prompt foreign investors to take profits of local assets. With this, they could get profits from increased returns on stocks and the baht's appreciation," Usara said.
From 2009, the Stock Exchange of Thailand Index has soared more than 250 per cent to 1,400 points. Indonesia's stock market has seen a 207-per-cent surge in the same period, while the Philippines' bourse has rocketed 233 per cent.