Baht Weakens After Draghi Offers No Immediate Action on Crisis

Thailand’s baht dropped after European Central Bank President Mario Draghi refrained from taking immediate measures to tackle the region’s debt crisis. Government bonds rose.

The MSCI Asia-Pacific Index (MXAP) of shares fell for a third day after Draghi signaled yesterday the monetary authority intends to join forces with governments to buy bonds in sufficient quantities to ease the crisis, while conceding that Germany has reservations about the plan. Non-manufacturing industries in China, Thailand’s biggest export market, expanded at a slower pace in July than the month before, official data showed today.

“The fact that they failed to provide any immediate action was a disappointment for the market,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “China’s condition remains sluggish. It’s hard to be aggressively buying Asian currencies until China recovers.”

The baht weakened 0.4 percent from Aug. 1 to 31.60 per dollar as of 3:21 p.m. in Bangkok, according to data compiled by Bloomberg. The currency declined 0.3 percent this week. Thailand’s financial markets were closed yesterday for a public holiday.

The baht’s one-month implied volatility, a measure of exchange-rate swings used to price options, dropped 51 basis points from a week ago to 4.51 percent. The rate was little changed today.

China’s purchasing managers’ index for non-manufacturing industries fell to 55.6 last month from 56.7 in June, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today. Fifty is the dividing line between contraction and expansion.

The yield on the 3.25 percent bonds due June 2017 declined two basis points, or 0.02 percentage point, to 3.16 percent from Aug. 1, according to data compiled by Bloomberg. The rate was little changed from a week ago.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net