Bond purchases hike Bt

The baht had a second straight weekly advance after global funds increased their Thai holdings due to optimism that growth in Southeast Asia's second-biggest economy will accelerate this year.

International investors bought US$562 million (Bt17.59 billion) more local bonds than they sold this week through yesterday and purchased a net $33 million of equities, according to data from the Thai Bond Market Association and stock exchange. The Dollar Index traded on ICE Futures in New York dropped this week after the Federal Reserve signalled it would keep borrowing costs low until late 2014.

"Regional currencies got a big boost this week from speculation that low interest rates in the US would encourage more fund inflows," Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp in Bangkok, said.

The baht climbed 0.7 per cent this week to 31.31 per dollar as of 3.14pm and touched 31.21 earlier, the strongest level since December 27. It declined 0.1 per cent today on speculation importers stepped up dollar buying to take advantage of a more favourable exchange rate.

It is quite a good level for importers to buy the dollar, Hasegawa said.

The Bank of Thailand estimates the economy will grow at least 4.8 per cent this year, Governor Prasarn Trairatvorakul said yesterday. That compares with its forecast for 1.8 per cent expansion in 2011.

The yield on the government's 5.25 per cent bonds due May 2014 dropped five basis points, or 0.05 percentage point, to 3 per cent this week. The rate fell two basis points today.