Baht Set for Worst Quarter in 13 Years as Fed Triggers Outflows

The baht was set for its worst quarter since 2000 as overseas investors cut holdings of Thai bonds and stocks on the prospect of the Federal Reserve phasing out stimulus that fueled demand for emerging-market assets.

The yield on 10-year government bonds increased in June by the most since March 2012 as global funds pulled $2.6 billion from Thai debt and equities, official data show. Fed Chairman Ben S. Bernanke said last week that bond-buying, known as quantitative easing, could be reduced this year and ended in 2014. The finance ministry cut its 2013 growth forecast yesterday to 4 percent to 5 percent, compared with a previous range of 4.8 percent to 5.8 percent, amid concern the economy of China, Thailand’s largest export market, is slowing.

“With concern about the Fed’s reduction in quantitative easing, fund outflows accelerated and that weighed on the baht,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Concern about China’s economy is also growing and that’s also negative for the baht.”

The baht slumped 6.1 percent this quarter, the most since the three months through September 2000, to 31.17 per dollar as of 9:11 a.m. in Bangkok, data compiled by Bloomberg show. The currency, which dropped 2.7 percent this month and 0.1 percent today, touched 31.25 on June 21, the weakest level since Sept. 7.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 273 basis points, or 2.73 percentage points, this quarter to 7.95 percent. It rose 139 basis points this month and 24 basis points today.

Exports Fall

Overseas sales dropped 5.3 percent in May from a year earlier after increasing 2.9 percent the previous month, official data showed this week. The Bank of Thailand may cut this year’s export growth forecast from the current 7.5 percent, Senior Director Mathee Supapongse said yesterday. Central bank data on trade is due today.

The yield on the 3.625 percent bonds due June 2023 rose 27 basis points from the end of March to 3.8 percent, the largest quarterly increase since the first three months of 2012, according to data compiled by Bloomberg. The rate advanced 29 basis points this month and declined two basis points today.

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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