Baht Falls on Growth Concern, Before Central Bank Policy Review

Thailand’s baht fell to a one-year low as the nation entered a recession for the first time since 2009, and before a central bank policy review in which economists predict borrowing costs will be kept unchanged.

The Bank of Thailand will leave its benchmark interest rate at 2.5 percent today, according to 19 of 20 economists surveyed by Bloomberg. One predicts a 25-basis-point cut. Global funds sold $530 million more Thai bonds than they bought this month through yesterday and pulled a net $791 million from stocks, official data show, amid speculation the Federal Reserve will pare stimulus that’s fueled demand for emerging-market assets.

“Basically, sentiment for emerging-market assets is weak due to speculation about the Fed’s tapering,” said Tsutomu Soma, a manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo. “Funds are flowing out from emerging markets. On top of that, Thailand’s growth concerns are adding downward pressure.”

The baht dropped 0.4 percent to 31.79 per dollar as of 10:12 a.m. in Bangkok after touching 31.81 earlier, the weakest level since July 25, 2012, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined four basis points, or 0.04 percentage point, to 6.94 percent.

The baht’s exchange rate reflects economic fundamentals and investors are still confident in the nation’s economic policies, central bank Governor Prasarn Trairatvorakul said yesterday. The currency’s decline is not a concern, he said.

Gross domestic product unexpectedly decreased 0.3 percent in the three months through June from the previous quarter, when it contracted a revised 1.7 percent, the National Economic & Social Development Board said Aug. 19. The agency cut its 2013 expansion forecast to 3.8 percent to 4.3 percent from 4.2 percent to 5.2 percent.

The yield on the 3.625 percent sovereign notes due June 2023 was little changed at 3.97 percent, data compiled by Bloomberg show.

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

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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