Baht Falls to a Three-Year Low, Stocks Drop on Political Unrest

Thailand’s baht fell to a three-year low and stocks dropped on concern prolonged political unrest will damp investment and hurt the economy.

More than 1,000 anti-government protesters have surrounded Prime Minister Yingluck Shinawatra’s home in Bangkok, as she criticized the opposition Democrat Party’s plan to boycott a Feb. 2 election. Suthep Thaugsuban, who is leading the demonstrators, has vowed to thwart the polls, which were announced after Yingluck dissolved the parliament on Dec. 9 amid mass protests. The Thai currency has lost 4.6 percent in the past two months as the main stock index dropped 9.1 percent.

“Investors aren’t buying the Thai baht if this political situation continues,” said Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp. in Bangkok. The baht may gradually weaken toward 32.9 per dollar as the political conflict threatens the economy, he said.

The baht depreciated 0.2 percent today to 32.680 per dollar as of 4:49 p.m. in Bangkok, according to data compiled by Bloomberg. The currency touched 32.773 earlier, the weakest level since June 2010.

Thailand’s SET Index (SET) of shares dropped 1.2 percent to close at 1,326.14, the lowest level since Sept. 5. The gauge, already Southeast Asia’s worst-performing benchmark this year, lost 3 percent in the past two weeks. Today’s drop in local stocks was led by financial companies including Bank of Ayudhya PCL, which slid 22 percent.

Tourism stocks also extended declines. Thai Airways International Pcl slid 3.4 percent, closing at the lowest level since August 2009. The airline said Dec. 20 its fourth-quarter performance will be below expectations as political unrest cuts travel demand. Minor International Pcl lost 6.3 percent as it closed at the lowest level since Sept. 6.

‘Orderly’ Depreciation

Protesters swarmed around two Bangkok buildings today to block candidates from registering for the election. Thirty-four parties, including Yingluck’s, were able to apply today, the first of a five-day registration period, Election Commissioner Somchai Srisuthiyakorn told reporters in Bangkok. Southeast Asia’s second-biggest economy expanded 2.7 percent in the third quarter, the least in more than a year.

The baht has weakened in an “orderly” way as the market continues to adjust to the Federal Reserve’s plan to taper its stimulus and the ongoing political unrest in the nation, Bank of Thailand spokeswoman Roong Mallikamas said in an interview. The central bank has “nothing special” planned to manage the currency at the moment, Roong added.

As the effectiveness of the election to end the street protests is now in doubt, the baht will come under more pressure, Credit Agricole CIB’s Hong Kong-based analyst Anthony Lam wrote in a research note today.

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, was little changed today at 6.24 percent.

Government bonds gained. The yield on the 3.625 percent notes due June 2023 declined five basis points to 3.98 percent, data compiled by Bloomberg show. The rate has dropped 15 basis points so far in December.

To contact the reporter on this story: Justina Lee in Hong Kong at jlee1489@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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