Bloomberg News

Baht Drops Most Since January as Central Bank Signals Rate Cut

October 20, 2011

Oct. 20 (Bloomberg) -- Thailand’s baht fell the most since January after central bank Governor Prasarn Trairatvorakul signaled the bank is willing to consider cutting interest rates as the nation’s worst flood in 50 years threatens to slow growth.

The Bank of Thailand left the benchmark one-day bond repurchase rate unchanged yesterday at 3.50 percent, halting its longest stretch of rate increases in five years, and warned that the floods will crimp economic growth. The waters have affected 14,254 factories and businesses in 20 provinces, according to the Labor Ministry. The government’s three-year bonds have rallied this month as official data on Oct. 3 showed consumer prices rose 4.03 percent in September from a year earlier, the least since March.

“The floods will hurt tourism, production, distribution and supply chains and reduce exports, hurting the baht,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo- Mitsubishi UFJ Ltd. “It is even possible the central bank will cut rates should inflation stabilize and that would also be negative for the baht.”

The baht lost 0.9 percent, the most since Jan. 10, to 30.98 per dollar as of 3:26 p.m. in Bangkok, according to data compiled by Bloomberg. The currency may weaken to about 31.50 before the year-end, Uchida said.

The yield on the 5.25 percent bonds due May 2014 increased four basis points, or 0.04 percentage point, to 3.33 percent, according to data compiled by Bloomberg. The rate has dropped 21 basis points this month.

The central bank will cut its forecast for economic growth this year by more than 1 percent, from a current target of 4.1 percent, because of the floods, Prasarn said today. The Bank of Thailand would be willing to hold a special meeting to discuss further easing of monetary policy “if needed,” he said.

--With assistance from Suttinee Yuvejwattana in Bangkok. Editors: Ven Ram, James Regan

To contact the reporter on this story: Yumi Teso in Bangkok at

To contact the editor responsible for this story: James Regan at

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