Bloomberg News

Baht Drops as Fed Plays Down Speculation of More Monetary Easing

June 08, 2012

Thailand’s baht fell the most in more than three months after Federal Reserve Chairman Ben S. Bernanke played down speculation of further monetary easing, sending regional stocks lower.

The currency pared a weekly advance as Bernanke said the Fed will need to assess economic conditions before deciding if a third round of so-called quantitative easing is needed. China cut benchmark interest rates yesterday for the first time since 2008 before data tomorrow on factory output and consumer prices.

“There are still jitters on the global front and at best the U.S. wants to keep the QE3 possibility vague for now,” said Enrico Tanuwidjaja, a Singapore-based senior currency analyst at Malayan Banking Bhd. “The market expects some bad data out of China and currencies of export-driven economies like Thailand will be affected.”

The baht declined 0.7 percent, the most since March 1, to 31.76 per dollar as of 3:47 p.m. in Bangkok, according to data compiled by Bloomberg. The currency gained 0.4 percent from a week ago. One-month implied volatility, a measure of exchange- rate swings used to price options, was little changed this week and today at 4.52 percent.

The MSCI (MXAP) Asia-Pacific Index of regional shares dropped 1.4 percent, halting a three-day rally. Overseas funds cut holdings of Thai equities by $63 million this week through yesterday, taking net sales this month to $88 million, exchange data show.

The People’s Bank of China cut its one-year lending and deposit rates by a quarter percentage point to 6.31 percent and 3.25 percent, respectively. The Bank of Thailand will hold its one-day repurchase rate at 3 percent on June 13, according to all 15 economists in a Bloomberg News survey.

The yield on the Thai government’s 3.25 percent bonds due June 2017 fell three basis points, or 0.03 percentage point, to 3.43 percent from a week ago, according to data compiled by Bloomberg.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net

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


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