SINGAPORE: The Thai baht hit its strongest level on Tuesday since the 1997 Asian financial crisis on sustained inflows, as investors doubted whether demand for Thai assets would be dampened by fears that a radical bailout plan for Cyprus could pitch the euro zone back into crisis.
The Thai currency has been the best performing currency so far this year with a 4.3 percent gain against the dollar, Thomson Reuters data showed.
The baht rose 0.6 percent to 29.34 per dollar as of 0240 GMT, its strongest in 16 years, according to Thomson Reuters data, leading gains in emerging Asian currencies.
"The baht is truly amazing. Stocks and bonds are bullish there. The baht has more room to appreciate, although the trend may slow down when it gets around 29.00 (per dollar)," said a European bank trader in Singapore.
"Cyprus is unlikely to have a big impact there," said the trader.
Investors remained wary over the potential for Cyprus to spark a general retreat from riskier assets, however, but confidence partially recovered after news on Monday that the Eurogroup decided to give the country more flexibility over a contentious bank levy which is part of the bailout conditions.
Last week, some interbank speculators built short positions in the baht in anticipation that concerns over Cyprus would damage sentiment, but on Tuesday they were forced to cover those positions to stop losses, traders said.
The baht is seen technically overbought with the dollar/baht's 14-day relative strength index at 20.9, well below the 30-threshold, making it ripe for profit taking, according to some traders.
Still, investors maintained bullish, given the sustained inflows into baht to fund Thai infrastructure projects, analysts and traders said.
"Recent action tells us that THB is continuing on the bull path with USD/THB downside likely to continue. Support at 29.25 in the short term, with 29.60 acting as minor resistance," Maybank said in a client note.
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