Bloomberg News

Thai Baht, Bonds Drop as Europe Debt Concern Deters Risk-Taking

May 16, 2012

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

New elections may be scheduled as early as June 10 after Greek President Karolos Papoulias failed to form a coalition following an inconclusive May 6 vote, threatening pledged spending cuts required to secure 240 billion euros ($306 billion) in bailouts. The baht has dropped 2.4 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 0.5 percent to 31.50 per dollar as of 3:21 p.m. in Bangkok and touched 31.57 earlier, 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 unchanged at 4.52 percent.

Investors are shifting funds to low-risk assets because of Europe’s debt concern and outflows of funds from Thailand aren’t “worrisome,” Bank of Thailand Governor Prasarn Trairatvorakul said today. The central bank hasn’t intervened in the currency market, he added.

The yield on the government’s 3.25 percent bonds due June 2017 rose two basis points, or 0.02 percentage point, to 3.63 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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