Baht Declines Most in a Week After Emergency Declared in Bangkok

Thailand’s baht fell the most in a week after Prime Minister Yingluck Shinawatra declared a state of emergency in Bangkok yesterday as escalating attacks on protesters threatened to derail elections set for Feb. 2.

The move marks a shift in strategy by Yingluck, who put up mild resistance as demonstrators calling for an unelected council to take power occupied buildings and streets over the past three months. Bombings at anti-government rallies and shootings in the capital have killed one person and injured 70 since Jan. 17. Global funds bought $139 million more Thai bonds than they sold in the first two days of this week amid speculation the central bank will lower borrowing costs today.

“The situation is getting worse, and the state of emergency is another negative factor” for Thailand, said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl. “We can’t see how it will end. The baht will remain under downward pressure.”

The baht depreciated 0.2 percent, the most since Jan. 15, to 32.89 per dollar as of 8:32 a.m. in Bangkok, according to data compiled by Bloomberg. It has weakened 5.2 percent since the protests began on Oct. 31. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell seven basis points, or 0.07 percentage point, to 7.15 percent.

Rate Speculation

Suthep Thaugsuban, a former opposition party lawmaker leading the protests, vowed to continue blockades of major Bangkok intersections that began on Jan. 13. Thailand last experienced a state of emergency to combat protests in 2010, when Suthep’s Democrat party held power and oversaw a crackdown on protesters loyal to Thaksin Shinawatra, Yingluck’s brother, that killed more than 90 people.

Two-year government bonds, which are the most sensitive to the policy outlook, were steady. The yield on the 3.125 percent debt due December 2015 was unchanged at 2.41 percent, according to data compiled by Bloomberg.

The Bank of Thailand will cut its policy rate to 2 percent from 2.25 percent today, according to 14 of 21 economists surveyed by Bloomberg. Seven forecast no change. The central bank delivered a surprise 25-basis-point reduction at its previous meeting on Nov. 27. The decision is due 2:30 p.m. local time 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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