Baht Declines as Moody’s Europe Downgrades Deter Risk-Taking

Thailand’s baht fell after Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal, damping demand for emerging-market stocks.

The currency retreated from near a three-month high and the MSCI Asia-Pacific Index (MXAP) of shares dropped after Moody’s said yesterday the uncertainty over the euro area’s prospects for changing its fiscal and economic framework was among the main reasons for the downgrades. Global funds bought $678 million more Thai equities than they sold this month through yesterday and purchased a net $2.2 billion of government debt, data from the stock exchange and the Thai Bond Market Association show.

“Moody’s downgrade may be regarded as a good excuse for those who want to take profits from the recent appreciation trend,” said Yuji Kameoka, the Tokyo-based chief currency strategist at Daiwa Securities Co. “With Asia’s economic performance, funds are flowing into the region.”

The baht weakened 0.2 percent to 30.87 per dollar as of 3:33 p.m. in Bangkok after touching 30.71 earlier, according to data compiled by Bloomberg. It reached 30.68 on Feb. 9, the strongest level since Nov. 9.

Euro-area finance chiefs will meet in Brussels tomorrow to decide whether to ratify a 130 billion euro ($171 billion) rescue package for Greece.

Thailand’s economy will expand 4.9 percent this year, compared with a previous prediction of 4.8 percent, the central bank said on Feb. 3. The monetary authority cut its growth estimate for 2011 to 1 percent from 1.8 percent the same day.

The yield on the government’s 3.25 percent bonds due June 2017 was steady at 3.14 percent, according to data compiled by Bloomberg.

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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