Bloomberg News

Thai Baht Drops as Europe Woes Deter Risk-Taking; Bonds Steady

May 15, 2012

Thailand’s baht fell to its weakest level since January after talks to form a government in Greece failed, spurring investors to the relative safety of the dollar. Government bonds were steady.

New elections may be scheduled as early as June 10 after President Karolos Papoulias failed to form a coalition following an inconclusive May 6 vote, threatening pledged spending cuts required to secure 240 billion euros ($305 billion) in bailouts. The baht has dropped 2.3 percent this month as global funds reduced holdings of local shares by $174 million during the period, exchange data show.

“The Greek issue is making investors risk averse, and that supports the dollar and other safer assets,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Asian currencies will likely see downward pressure for the time being.”

The baht lost 0.4 percent to 31.45 per dollar as of 8:27 a.m. in Bangkok, the weakest level since Jan. 26, according to data compiled by Bloomberg. The currency may retreat to about 31.60 over a week, Hayashi said.

One-month implied volatility, a measure of foreign-exchange swings used to price options, was little changed at 4.52 percent.

The yield on the government’s 3.25 percent bonds due June 2017 was unchanged at 3.61 percent, according to data compiled by Bloomberg.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.


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