Bloomberg News

Baht Set for Worst Week Since April on Fed Unwinding; Bonds Fall

June 20, 2013

The baht headed for its biggest weekly slide since April as foreigners cut holdings of Thai assets after the Federal Reserve said it will probably taper its stimulus that has fueled demand for emerging-market assets.

The baht touched a nine-month low today after Fed Chairman Ben S. Bernanke said June 19 that $85 billion a month of debt purchases may be trimmed this year and ended in 2014 as long as the U.S. economy performs in line with estimates. Global funds sold $179 million more Thai bonds than they bought this week through yesterday and pulled $288 million from stocks, official data show. A preliminary report yesterday showed manufacturing probably decreased this month in China, Thailand’s biggest export market.

“The Fed’s stimulus outlook dominates the market and is weighing on regional currencies and assets,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “Data indicating a China slowdown is adding to the negative sentiment.”

The baht fell 1.8 percent this week and 0.1 percent today to 31.14 per dollar as of 9:03 a.m. in Bangkok, data compiled by Bloomberg show. The currency touched 31.21 earlier, the weakest level since Sept. 7, 2012, while the weekly decline was the largest since the five days ended April 26. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, jumped 97 basis points this week and two basis points today to 7.98 percent.

Foreign Reserves

The preliminary reading of 48.3 for a Purchasing Managers’ Index for China released yesterday by HSBC Holdings Plc and Markit Economics compares with the 49.1 median estimate in a Bloomberg News survey of 15 economists. Fifty is the dividing line between expansion and contraction. Asia’s largest economy bought almost 12 percent of Thai shipments in the first four months of this year, official data show.

The Bank of Thailand will step in to curb excessive volatility in the baht if needed, Deputy Governor Pongpen Ruengvirayudh told reporters yesterday in Bangkok. Finance Minister Kittiratt Na-Ranong said the same day he wants the Bank of Thailand to “manage the foreign-exchange rate,” adding the nation can cope with outflows given the size of its reserves. Foreign currency holdings stood at $176.5 billion on June 7, up 2.7 percent from a year earlier, central bank data show.

The yield on the 3.625 percent government bonds due June 2023 climbed 31 basis points this week to 3.98 percent, according to data compiled by Bloomberg. The rate rose one basis point, or 0.01 percentage point, today.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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