Baht Set for Worst Week of 2014 as Protests Cloud Growth Outlook

Thailand’s baht headed for its worst week this year amid concern prolonged political turmoil will deepen an economic slowdown.

Clashes between police and anti-government protesters left five people dead and injured at least 69 on Feb. 18, prompting Moody’s Investors Service to warn the unrest may hurt Thailand’s credit profile if it stretches beyond the first half. The economy grew 2.9 percent last year, after a revised 6.5 percent in 2012. The Bloomberg-JPMorgan Asia Dollar Index (ADXY) fell this week as minutes of the Federal Reserve’s January meeting showed support for stimulus cuts and data from China missed estimates.

“The unrest in Thailand would keep downward bias on the baht,” said Pareena Phuangsiri, an analyst at Kasikornbank Pcl in Bangkok. “Global factors such as the Fed’s minutes and China data also impacted the baht and the Asian currencies.”

The baht depreciated 0.6 percent this week to 32.525 as of 9:35 a.m. in Bangkok, the biggest five-day loss since the period ended Dec. 27, according to data compiled by Bloomberg. The currency rose 0.2 percent today.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 10 basis points today to 6.47 percent. It rose seven basis points, or 0.07 percentage point, this week.

Investors should sell the baht against the dollar before the weekend as Thai farmers plan to step up protests in Bangkok against payment delays in a grain purchase program, Credit Agricole CIB economist Dariusz Kowalczyk wrote in a note today.

‘Further Instability’

“The risk of further instability over the weekend is high,” Kowalczyk wrote.

A preliminary Purchasing Managers’ Index in China, Thailand’s largest export market, fell to a seven-month low in February, HSBC Holdings Plc and Markit Economics reported yesterday. Several Fed officials back a continued decrease in bond purchases unless there is an “appreciable change” in the U.S. economic outlook, the minutes released this week showed.

Thailand’s two-year sovereign bonds gained. The yield on the 3.125 percent notes due in December 2015 fell five basis points this week and one basis point today to 2.31 percent, data compiled by Bloomberg show. That’s the lowest level since the bonds were auctioned in 2010.

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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