Thailand’s baht fell, headed for its biggest weekly decline since 2008, on concern monetary authorities will intervene in the currency market and introduce measures to slow the pace of gains that hurt exports.
The baht dropped the most in more than a year yesterday after the Bank of Thailand said its board approved a plan to allow foreign-exchange reserves to be invested in bonds issued by state agencies overseas. Commerce Minister Boonsong Teriyapirom said yesterday export growth may be lower than 5 percent this year, compared with a target of 8 percent to 9 percent. Prime Minister Yingluck Shinawatra called a meeting on the baht, the Thai language Krungthep Turakij newspaper reported today, without saying where it got the information.
“It actually suggests that they are now becoming more serious and could potentially introduce further measures down the road,” said Sacha Tihanyi, a Hong Kong-based senior foreign-exchange strategist at Bank of Nova Scotia, which was the second most-accurate forecaster for Asian currencies over the past year. “I think it will not only incentivize baht profit taking, but also open the door to baht shorts,” he said, referring to a selling stance on the currency.
The baht depreciated 0.4 percent today and 1.9 percent this week to 29.23 per dollar as of 9:15 a.m. in Bangkok, according to data compiled by Bloomberg. The weekly loss was the biggest since the five-day period ended June 6, 2008 and pared this year’s appreciation to 4.6 percent, the best performance in Asia. Bank of Nova Scotia predicts the baht will weaken to 30.4 by the end of June.
Brown Brothers Harriman & Co. and Morgan Stanley said in research notes yesterday that the baht has further room to weaken. Morgan Stanley sees further downside in the short term to 29.50 per dollar. “We think foreign-exchange intervention and more regulatory measures are likely should the baht continue to strengthen, though we doubt more draconian measures will be introduced,” according to Brown Brothers’ currency strategist Ilan Solot in London.
The baht touched 28.56 on April 22 and April 19, the strongest level since a devaluation in July 1997 that sparked the Asian financial crisis, as investors increased holdings of the nation’s debt. Global funds bought $2.1 billion more sovereign notes than they sold this month through yesterday, taking this year’s net purchases to $12 billion, Thai Bond Market Association data show.
Prime Minister Yingluck and Finance Minister Kittiratt Na- Ranong will discuss the baht’s appreciation with officials from the Bank of Thailand, finance ministry and related agencies, Krungthep Turakij reported today. A meeting will be held at 3 p.m. and will likely focus on the outlook for the baht rather than any new measures to curb the currency, it said.
Kittiratt and central bank Governor Prasarn Trairatvorakul have repeatedly said there’s no need to impose controls to stem inflows.
The central bank is worried about the baht’s rally this year, Assistant Governor Chantavarn Sucharitakul said on April 24. The comment came after Prasarn said April 19 that the baht has started to move beyond its fundamentals and Assistant Governor Paiboon Kittisrikangwan said April 22 that it has risen “too much and too quickly.”
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed six basis points this week to 5.34 percent. The gauge fell two basis points, or 0.02 percentage point, today.
The yield on the government’s 5.125 percent debt due March 2018 rose five basis points from a week ago to 3.17 percent and was up two basis points today, data compiled by Bloomberg show. The rate reached 3.1 percent on April 18, the lowest level since November 2010.
To contact the reporter on this story: Yumi Teso in Bangkok at firstname.lastname@example.org