The Bank of Thailand stepped in the market on Wednesday to curb the baht's appreciation, traders said, while Singapore dollar's rally fuelled fears of intervention by authorities there. The two currencies were among the top gainers in Asia, but others failed to capitalise on a broadly weaker US dollar as investors braced for uncertainties in the global economy despite tentative signs of a recovery.
The baht rose a third of a percent to 34.42 per dollar, its highest level since December 18, as the US dollar faltered globally. The baht later pulled back to 34.46. "The market is selling (dollars), while the Bank of Thailand is buying," said a trader in Singapore.
A Bangkok-based trader also suspected "strong intervention" by the central bank near 34.50. Traders said the baht would continue to rise in the near term but it may lose steam due to intervention and profit-taking. The baht has gained almost 5 percent since March 3.
Foreign exchange reserves, held by Asian central banks excluding China, rose by $15.2 billion in April and $38.8 billion in March, official data showed. Ashley Davies, strategist at UBS, said the growing reserves reflected capital inflows and solid trade surpluses in many Asia economies, where falling imports are offsetting weaker exports.
"Under this scenario, Asian central banks are again buying reserves to prevent their respective currencies from strengthening more than it has done. But we think the intervention has been patchy," he said in a note. The Singapore dollar gained 0.6 percent to 1.4526 per US dollar, its highest since January 5.
The currency, which has gained nearly 7 percent since early March, later eased to 1.4563 due to fears of possible central bank intervention. "Rumours that the authority is in all the time fail to stop US dollar sellers," said a Singapore-based trader. Singapore's central bank, which manages the currency within a nominal effective exchange rate (NEER) band as its policy tool, lowered the centre of the band last month to spur the economy.
Thio Chin Loo, strategist at BNP Paribas, reckoned that the Monetary Authority of Singapore was unlikely to be concerned about the currency's recent gains for now. "Our Singapore dollar NEER is in the middle of the band, so the MAS should be pretty comfortable," she said. The central bank keeps the trade-weighted band secret, leaving analysts to estimate whereabouts the currency.