Bloomberg News

Thai Baht in Biggest Weekly Decline in a Month After Failed Vote

March 27, 2014

Thailand’s baht was set for the biggest weekly loss in more than a month on concern delays in forming a new government will deepen an economic slowdown.

The currency fell for a second week, paring a quarterly advance, after the Constitutional Court ruled on March 21 that last month’s general election was invalid and the Election Commission said the same day it may be at least three months before a new vote can be held. The caretaker status of Prime Minister Yingluck Shinawatra’s administration limits borrowing, hampering its ability to spur expansion. The baht rose today on bets exporters will repatriate overseas income toward month-end.

“Uncertainty about when the new government can be formed was weighing on the baht,” said Kozo Hasegawa, a currency trader at Sumitomo Mitsui Banking Corp. in Bangkok. “Speculation of Japanese fund repatriation toward the financial year-end on March 31 also helped drag the baht down. But we may see some baht demand from local exporters toward month-end.”

The Thai currency depreciated 0.4 percent this week to 32.523 per dollar as of 8:57 a.m. in Bangkok and reached a three-week low of 32.624 on March 26, according to data compiled by Bloomberg. The currency, which rose 0.2 percent today and 0.8 percent this quarter, has weakened 4.3 percent since the anti-government demonstrations began on Oct. 31, the worst performance among Asian currencies.

One-month implied volatility, a measure of expected moves in the baht used to price options, dropped 21 basis points from a week ago and six basis points today to 6.27 percent.

Economic Outlook

Thailand’s finance ministry cut its 2014 economic-growth prediction yesterday to 2.6 percent from an earlier target of 3.1 percent and said the failure to form a new government may delay approval of the budget until the second quarter of 2015. A prolonged political deadlock lasting into the second half of the year may prompt a reassessment of Thailand’s rating outlook, Fitch Ratings said last week.

The Bank of Thailand cut its expansion forecast for this year on March 21 to 2.7 percent from an earlier estimate of 3 percent. The projections are based on the assumption that political tensions will ease by the middle of the year and the growth rate may be lower should the unrest stretch into the second half, it said.

Government bonds advanced this week. The yield on the 3.625 percent sovereign notes due June 2023 dropped eight basis points, or 0.08 percentage point, to 3.72 percent this week. The rate was little changed today.

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

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Anil Varma, Andrew Janes


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