Baht Surges to Eight-Month High as Global Funds Buy More Local Assets

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Baht Surges to Eight-Month High as Global Funds Buy More Local AssetsThe baht rallied to its highest level in eight months while sovereign bonds surged after foreign investors purchased local assets in anticipation that government expenditure will boost the sluggish economy.

The baht increased as much as 0.3 percent to trade at 31.822 per dollar, its highest level since November 25 before falling back to 31.859 as of 3:24 p.m. local time. The currency’s 1.8 percent increase this month makes it the second-best among the 24 emerging-economy currencies monitored using Bloomberg Correlation-Weighted Indexes.

“It seems that the junta is at least providing some stability for the economic outlook,” Jonathan Cavenagh, a Singapore-based currency strategist at Westpac Banking Corp, told Bloomberg. “Measures of consumer and business confidence have been tracking higher, so that’s probably giving the market a bit more confidence.”

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The yield on the 3.785 percent Thailand’s government bonds that mature on June 2019 fell 0.02 percentage points or two basis points, to 3.01 percent, the weakest level since May 21. A measure of consumer confidence increased to 75.1 in June, the most since October, reported the University of the Thai Chamber of Commerce on July 3.

Since May 22 army coup, the baht has rallied 2.2 percent as investors sought Thai bonds and stocks after the junta boosted state spending in order to revive the economy. The junta announced in June that it will spend 2.4 trillion baht ($75 billion) to boost infrastructure such as railways, airports and highways from 2015 to 2022.

Foreign investors purchased a net $331.6 million of Thai stocks and equities on Monday, resulting in a cumulative monthly inflow of $3.31 billion in July. The target SET Index of equities, which recorded its strongest closing level since June 2013 on Monday, fell 1 percent today as it appeared set to post its steepest loss since June 18. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com