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Thai Baht, Bonds Poised for Weekly Decline on Fed Policy Outlook

Thailand’s baht was set for a seventh weekly slide, the longest run of losses since February 2009, and government bonds fell on bets foreign funds will trim holdings of local assets should the Federal Reserve reduce stimulus.

Global funds sold $568 million more of Thai equities than they bought this week through yesterday, exchange data show. Somchai Sujjapongse, director general of the finance ministry’s fiscal policy office, said June 5 outflows are expected to be temporary and the government has prepared measures to handle inflows when they resume. The baht has dropped 6.6 percent from a 16-year high reached in April on concern policy makers will impose capital controls to curb excessive market volatility.

“Investors are unwinding their positions on riskier assets amid speculation on whether the Fed will reduce its stimulus,” said Koji Fukaya, chief executive officer and foreign-exchange strategist at FPG Securities Co. in Tokyo. “In the case of Thailand, there’s lingering concern about capital controls.”

The baht declined 0.8 percent this week to 30.58 per dollar as of 8:28 a.m. in Bangkok and touched 30.66 earlier, the weakest level since Jan. 2, data compiled by Bloomberg show. The currency rose 0.1 percent today. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 22 basis points, or 0.22 percentage point, this week and eight basis points today to 6.34 percent.

Central Bank

Bank of Thailand has prepared measures to combat baht volatility although they may not be used if they aren’t necessary, Assistant Governor Paiboon Kittisrikangwan said May 29. The currency touched 28.56 on April 19 and April 22, the strongest level since July 1997.

Global funds pulled a net $639 million from sovereign debt since the end of April after net purchases of almost $12 billion in the first four months of 2013, according to the Thai Bond Market Association.

The yield on the 3.625 percent notes due June 2023 rose six basis points this week to 3.57 percent, data compiled by Bloomberg show. The rate was little changed today.

Fed Chairman Ben S. Bernanke said on May 22 that the U.S. central bank could taper its $85 billion a month of bond purchases if the nation’s employment outlook shows sustainable improvement. Labor Department data today may show U.S. firms added 163,000 jobs in May, compared with 165,000 the previous month, according to the median forecast of economists in a Bloomberg survey.

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

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