Baht Touches One-Week Low on U.S. Budget Deadlock; Bonds Advance

Thailand’s baht touched a one-week low as concern U.S. lawmakers will fail to avert spending cuts and tax increases due early next year damped demand for riskier assets. Government bonds rose.

The MSCI Asia Pacific Index (MXAP) of stocks declined for a third day after House Republican leaders canceled a vote on Speaker John Boehner’s plan to allow higher tax rates for annual income above $1 million. Senator Joseph Lieberman said on CNN the odds are that Republicans and Democrats won’t be able to agree on budget revisions required to avoid the so-called fiscal cliff. Overseas funds sold 1.2 billion baht ($39 million) more Thai government debt than they bought last week, official data show.

“Concern over the U.S budget talks is the main factor that’s damping demand for Asian currencies,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. “The baht will likely move in a tight range with an upside bias in the near term.”

The baht was steady at 30.63 against the greenback as of 3:38 p.m. in Bangkok, according to data compiled by Bloomberg. It touched 30.68 earlier, matching last week’s low that was the weakest level since Dec. 12, and has gained 3.1 percent this year. One-month implied volatility, a measure of expected moves in exchange rates used to price options, was little changed at 3.91 percent.

Government bonds advanced for a fourth day. The yield on the 3.125 percent securities due June 2023 decreased one basis point, or 0.01 percentage point, to 3.55 percent, the lowest level since Dec. 11, data compiled by Bloomberg show. The yield climbed 15 basis points this year.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net.

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

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