Baht Set for Worst Monthly Loss Since May on Protests, Rate Cut

The Thai baht headed for its biggest monthly decline since May and 10-year sovereign bonds dropped as overseas funds cut holdings of the nation’s assets amid concern political unrest will hurt economic growth.

The Bank of Thailand unexpectedly lowered its benchmark interest rate this week as month-long anti-government demonstrations weigh on investor confidence. Exports, which account for about two-thirds of the economy, fell 0.7 percent in October after a 7.1 percent drop the previous month, Customs data showed on Nov. 27. That compared with the median estimate from economists for a 0.4 percent gain in Bloomberg survey.

“While economic conditions don’t look so sound, social unrest is adding to investor concerns,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “There’s some speculation of an additional rate cut, which means the latest reduction may not be enough to boost growth, and we don’t know how the protests will end.”

The baht slumped 3 percent in November and 0.9 percent this week to 32.098 per dollar as of 9:34 a.m. in Bangkok, according to data compiled by Bloomberg. The currency, which rose 0.1 percent today, touched 32.228 yesterday, the weakest level since Sept. 9.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, jumped 47 basis points in November and 26 basis points this week to 6.28 percent.

Bonds Fall

The central bank is due to report figures on exports (THCTEXPY), the current account and business sentiment later today.

Global funds sold $1.3 billion more Thai bonds than they bought this month through yesterday and pulled a net $1.5 billion from equities, official data show.

Thailand’s main opposition party pledged to fully support protests aimed at ousting Prime Minister Yingluck Shinawatra and dismantling the political network of her brother, Thaksin, who was toppled in a 2006 coup. “The party will support the uprooting of Thaksin’s regime,” Abhisit Vejjajiva, the Democrat party leader who oversaw a deadly crackdown on Thaksin’s supporters as premier in 2010, said yesterday.

The central bank cut its policy rate by a quarter of a percentage point to 2.25 percent on Nov. 27, a decision not expected by any of the 19 economists surveyed by Bloomberg. It also lowered the 2013 economic growth forecast to about 3 percent from 3.7 percent.

The yield on the 3.625 percent government bonds due June 2023 increased 18 basis points, or 0.18 percentage point, in November to 4.12 percent, data compiled by Bloomberg show. The rate fell nine basis points this week and was little changed 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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