Baht defies Asia currency weakness as vote buoys democracy hopes

[KUALA LUMPUR] Thailand's baht climbed from a three-week low after voters approved a military-backed constitution which could mark the first step toward restoring democracy in the Southeast Asian nation.

The passing of the charter, the first vote since junta leader Prayuth Chan-Ocha seized power two years ago in a coup, means the military is more likely to stick to its current timeline of holding elections in late 2017.

"The Thai baht has firmed due to the new constitution drafted by the junta, which paves the way for elections," said Wu Mingze, a foreign-exchange trader in Singapore at INTL FCStone Inc, a Nasdaq-listed global payments-service provider.

"This settles political uncertainty but it's too soon to tell if this is a genuine move by the junta to release power."

The baht strengthened 0.2 per cent to 34.998 per US dollar as of 8:55 am in Bangkok after falling to a three-week low of 35.120 on Friday, according to data compiled by Bloomberg.

It's the only Asian currency to gain on Monday after better-than-expected US jobs data boosted demand for the dollar.

The baht is likely to trade in a range of 34.80 to 35.30 this week, as the passing of the constitution bolsters investor confidence in Thai assets in the short term, TMB Bank PCL's Bangkok-based strategist Jitipol Puksamatanan wrote in a note on Monday.

"The result provides relief to the investors, supporting the baht and the Thai assets," says Tsutomu Soma, Tokyo-based general manager of fixed-income at SBI Securities.

"Stability in Thailand is likely to remain, which should encourage inflows to continue for now."

Global funds have poured almost US$12 billion into Thai bonds and stocks this year, according to data compiled by Bloomberg.

Thais voted 61.4 per cent in favor of the draft versus 38.6 per cent who voted to reject it, the Election Commission said late Sunday with 94 per cent of votes counted. Official results aren't expected for several days.

The yield on government bonds due in 2025 rose four basis points to 2.04 per cent, according to data compiled by Bloomberg.

BLOOMBERG