Thai Baht Set for Biggest Weekly Loss Since January on Political Violence

Thailand’s baht fell, headed for its biggest weekly loss since January, after the worst political violence in 18 years prompted overseas investors to cut their holdings of the nation’s shares.

The currency slid to a two-week low yesterday and foreigners sold more stocks than they bought for a sixth day after a soldier was shot dead and two more injured in a skirmish with anti-government protesters. The demonstrators have been occupying a district of Bangkok since April 3 and clashes involving them have claimed 27 lives this month.

“There is concern foreign investors will sell more Thai stocks amid the worsening political situation,” said Hideki Hayashi, a global economist at Mizuho Securities Co. in Tokyo. “The baht is one of the region’s weaker currencies because there’s uncertainty as to when the political turmoil will end.”

The baht dropped 0.2 percent to 32.33 as of 10:26 a.m. in Bangkok, taking this week’s loss to 0.4 percent, according to data compiled by Bloomberg. The currency yesterday touched 32.39, the weakest level since April 14. The baht may trade between 32 and 32.40 in May, Hayashi said.

Foreign investors sold 6.02 billion baht ($186 million) more of Thai equities than they bought in the last four days, according to stock exchange data. They recorded the biggest net sales in five months on April 28, when authorities used force to prevent a convoy of about 5,000 demonstrators from traveling to the north of Bangkok. Seventeen protesters were injured in the incident, which led to the soldier’s death.

Possible Downgrades

Standard & Poor’s said April 26 that Thailand may face a downgrade of its BBB+ credit rating should the political unrest continue. Fitch Ratings cut its outlook on the nation’s local- currency credit rating to negative from stable last week, citing “an escalation in political uncertainty.”

Interest-rate swaps show investors are paring bets as to when the central bank will tighten monetary policy.

The one-year onshore interest-rate swap, the fixed cost needed to receive a floating payment, fell to 1.28 percent from 1.525 at the start of this week. The benchmark rate is 1.25 percent.

“With the political turmoil, the central bank will have to delay the timing of a rate increase,” Hayashi said.

A central bank report today is expected to show industrial production increased 26 percent in March from a year earlier, after gaining 30.3 percent the previous month, based on the median forecast of economists in a Bloomberg survey.

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

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