Bloomberg News

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

May 29, 2012

Thailand’s baht dropped toward its weakest level in four months and government bonds fell as concern Europe’s debt crisis will worsen damped demand for emerging-market assets.

Global funds sold $525 million more Thai equities than they bought in May, exchange data show, contributing to the baht’s 2.9 percent slump during the period. The Bloomberg-JPMorgan Asia Dollar Index traded near this year’s low after the extra yield investors seek to hold Spain’s 10-year bonds over German notes soared to the highest level since 1995.

“With growing concern about Europe’s situation, we are seeing risk-off sentiment again, and investors don’t want to put money into emerging markets,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Fund outflows are weighing on the baht.”

The baht retreated 0.2 percent to 31.67 per dollar as of 3:22 p.m. in Bangkok, according to data compiled by Bloomberg. The currency touched 31.84 yesterday, the weakest level since Jan. 17. One-month implied volatility, a measure of exchange- rate swings used to price options, was unchanged at 4.52 percent.

The yield on the government’s 3.25 percent bonds due June 2017 rose two basis points, or 0.02 percentage point, to 3.62 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 in Hong Kong at shendry@bloomberg.net. NI THAI NI FRX NI BON NI EM NI CLM NI GBN NI ASIAX NI ASIA NI FXMARKETS NI FX


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