Baht Falls to Three-Year Low on Fed Minutes, Growth Concern

Thailand’s baht fell to the weakest level since August 2010 after Federal Reserve minutes showed officials support a cut in stimulus this year if the U.S. economy improves.

The baht slipped beyond 32 per dollar for the first time since July 2012 as official data showed global funds sold $582 million more Thai bonds than they bought this month through yesterday and pulled a net 30.6 billion baht ($954 million) from equities. A government report this week showed Southeast Asia’s second-largest economy entered a recession for the first time since 2009.

“There’s concern of fund outflows from emerging markets due to the Fed’s tapering, which is weighing on regional currencies,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “Growth in emerging countries has been slowing, hurting sentiment further.”

The baht dropped 0.8 percent to 32.09 per dollar as of 7:48 a.m. in Bangkok and touched a three-year low of 32.13 earlier, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed six basis points, or 0.06 percentage point, to 7.2 percent.

Fed officials were “broadly comfortable” with Chairman Ben S. Bernanke’s plans to start reducing bond buying later this year should the economy improve, with a few saying tapering may be needed soon, minutes of their July meeting showed.

Thailand’s 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.

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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