Baht Falls as Concern Over Europe Debt Crisis Deters Risk-Taking

Thailand’s baht and government bonds fell as Italy’s rising borrowing costs reignited concern Europe’s debt crisis will worsen, curbing demand for emerging- market assets.

The currency approached a one-week low after Italy sold 3 billion euros ($4.1 billion) of five-year bonds at a yield of 6.29 percent yesterday, the highest since June 1997. The Bank of Thailand will closely monitor the currency market on expectation volatility may continue until year-end on flood-related factors, Assistant Governor Pongpen Ruengvirayudh said yesterday.

“People realized that Europe is not going to solve its issue overnight even with new governments,” said Thio Chin Loo, a Singapore-based senior currency analyst at BNP Paribas SA. “Sentiment will swing during this period of uncertainty. Due to the floods, there’s more concern about growth.”

The baht declined 0.1 percent to 30.78 per dollar as of 8:34 a.m. in Bangkok, according to data compiled by Bloomberg. The currency touched 30.83 earlier, approaching yesterday’s low of 30.91, the weakest level since Nov. 2.

The yield on the 5.25 percent debt due May 2014 rose three basis points, or 0.03 percentage point, to 3.24 percent, according to data compiled by Bloomberg.

Floodwaters have swamped about 10,000 factories and stopped production at companies including Honda Motor Co. The damage from the disaster has increased to an estimated 346.2 billion baht ($11.2 billion) and may curb economic growth by between 3.1 and 3.4 percentage points this year, the University of the Thai Chamber of Commerce said on Nov. 10.

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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