Baht Falls This Week on Signs Political Unrest to Slow Growth

Thailand’s baht slid this week, trading near an 11-week low, as policy makers said the deadliest political violence in almost two decades and the European debt crisis will cool economic growth.

The currency completed its fourth weekly decline as Bank of Thailand Deputy Governor Bandid Nijathaworn said yesterday expansion in Southeast Asia’s second-largest economy will slow this quarter as protests hurt the tourism industry. Five-year government bonds climbed for a second week as the Bank of Thailand left its benchmark interest rate unchanged at a review.

“Some people are afraid that the European debt crisis will get worse, while the Thai economy may be affected by the political turmoil last month,” said Paisarn Lertkowit, a currency trader at Bangkok Bank Pcl, the country’s biggest lender. “But exporters still like to sell on rallies in the dollar,” helping to halt the baht’s decline, he said.

The baht fell 0.1 percent this week to 32.59 per dollar as of 4:39 p.m. in Bangkok, according to data compiled by Bloomberg. The currency was little changed from yesterday. The baht touched 32.63 on June 1, the lowest level since March 15.

The political unrest that left 87 people dead will have a significant impact on the economy in the second quarter, central bank Governor Tarisa Watanagase said on May 26. Satit Rungkasiri, the finance ministry’s head of fiscal policy office, said that day the turmoil may reduce gross domestic product growth this year by as much as 1.1 percentage points. The ministry, which expects the economy to grow 4.5 percent this year, will revise the forecast on June 29, Satit said.

Yields Slide

The yield on the 3.625 percent bond maturing in May 2015 dropped nine basis points this week to 3.05 percent, according to the Thai Bond Market Association. The price gained 0.41 to 102.6111. The yield reached its lowest level since September on June 2, when Bank of Thailand policy makers kept the benchmark interest rate at 1.25 percent, the lowest level since July 2004.

“There are uncertainties in the political situation and sovereign-debt problems in some European countries, so we are not in a hurry to raise the rate now,” central bank Assistant Governor Paiboon Kittisrikangwan said after the rate decision.

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 at shendry@bloomberg.net

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