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Baht Falls After Finance Minister Seeks Lower Borrowing Costs

Thailand’s baht fell, snapping a two-day gain, after Finance Minister Kittiratt Na-Ranong said the currency needs to weaken and borrowing costs should be reduced to support Southeast Asia’s second-largest economy.

The baht declined 0.2 percent to 31.54 per dollar as of 3:16 p.m. in Bangkok, according to data compiled by Bloomberg. Its three-month implied volatility, a measure of exchange-rate swings used to price options, fell 24 basis points, or 0.24 percentage point, to 6 percent. The yield on the 3.25 percent bonds due June 2017 held at 3.12 percent, according to data compiled by Bloomberg.

The Bank of Thailand has kept its benchmark interest rate unchanged at 3 percent for four straight meetings after cutting it in January. The rate “should be at 2.5 percent,” Kittiratt said yesterday in Bangkok, adding that he wants to see the baht weakening slightly to help exporters. The currency reached 31.27 on Aug. 6, the strongest level since May 22. The MSCI Asia-Pacific Index rose for a third day on speculation global central banks will take steps to boost growth.

“Asian countries’ attractiveness is their higher yields, therefore the prospect of a rate cut would put some downward pressure on the currency,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “You may also expect some importer demand for dollars when the baht is near its recent high. However, sentiment itself is not too weak with gains in stocks.”

The Bank of Thailand will next review monetary policy on Sept. 5. Exports, which account for about two-thirds of the economy, dropped 4.3 percent in June from a year earlier, the third decline in four months, while imports increased 5 percent, according to central bank data.

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