Baht Touches Three-Week Low on Concern Protests Will Hurt Growth

Thailand’s baht touched a three-week low on concern anti-government protests triggered by a proposed amnesty law for political offenses will deepen a slowdown in Southeast Asia’s second-biggest economy.

The currency fell for a second week as official data showed global funds pulled $404 million from Thai bonds in the first four days and $166 million from equities. Prime Minister Yingluck Shinawatra called yesterday for an end to street demonstrations in Bangkok after agreeing to a demand for scrapping the controversial legislation. The Senate is set to vote on the bill at 2 p.m. today.

“Prolonged political unrest will hurt the economy that’s already weak, and with the current mood foreigners probably don’t want to put money in Thailand,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “The political situation will weigh on the baht, which may underperform its regional peers.”

The baht lost 0.5 percent from a week ago and 0.1 percent today to 31.365 per dollar as of 9:24 a.m. in Bangkok, according to data compiled by Bloomberg. The currency reached 31.375 earlier, the weakest level since Oct. 17.

One-month implied volatility in the baht, a measure of expected moves in exchange rates used to price options, climbed 18 basis points this week to 5.95 percent. The gauge dropped nine basis points, or 0.09 percentage point, today.

Should the proposed amnesty law be rejected today by the Senate, it would go back to the lower house for 180 days. Former Prime Minister Abhisit Vejjajiva told a rally on Nov. 5 that he will continue to fight until the legislation is scrapped, adding that the blockage by the Senate doesn’t mean the bill is abandoned.

Hurting Confidence

Political uncertainty is “another additional headwind” for the Thai economy, Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd., the most accurate baht forecaster over the last four quarters, said in an interview this week. Analysts at the bank predict the local currency will weaken 2 percent to 32 per dollar by year-end.

Finance Minister Kittiratt Na-Ranong said yesterday the political tension has threatened economic growth because it erodes confidence. The demonstrations could curb gross domestic product gains this year by between 0.1 percentage point and 0.5 percentage point, from the currently estimated 3.5 percent, the University of the Thai Chamber of Commerce said yesterday.

The yield on the 3.625 percent bonds due June 2023 dropped five basis points this week and one basis point today to 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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