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Baht Falls Most in Two Weeks as Stocks Drop on Political Unrest

Thailand’s baht fell by the most in two weeks and stocks dropped amid concern prolonged political unrest will deepen a slowdown in Southeast Asia’s No. 2 economy.

Prime Minister Yingluck Shinawatra said today an election set for Feb. 2 will proceed even as anti-government protesters blockade central Bangkok for a third day demanding her removal. Gunfire was reported and two people were injured near a rally at the city’s Patumwan intersection, Bangkok Emergency Medical Service said on its website.

“We are seeing protest scenes on the television frequently, and that gives the impression the situation is quite tense,” said Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo. “We all know there’s political unrest in Thailand and sentiment remains weak for the baht and Thai assets.”

The local currency declined 0.4 percent, the most since Jan. 2, to 32.878 per dollar as of 4:40 p.m. in Bangkok, according to data compiled by Bloomberg. The baht, which touched the lowest level since 2010 of 33.148 on Jan. 6, may fall to 33 this week, Soma said.

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, rose two basis points, or 0.02 percentage point, to 7.24 percent. The SET Index of shares dropped 1.5 percent to 1,277.03, snapping a two-day gain.

Economic Impact

“Thai equities will be clouded further by the political turmoil,” said Poramet Tongbua, strategist at Bualuang Securities Pcl in Bangkok.

Prolonged protests may hurt confidence in the economy and private investment and consumption may be affected, Caretaker Finance Minister Kittiratt Na-Ranong said yesterday. Gross domestic product increased 2.7 percent in the third quarter of 2013 from a year earlier, the smallest gain since the first three months of 2012, the most recent official figures show.

The yield on the 3.625 percent government bonds due June 2023 fell five basis points to 4.02 percent, according to data compiled by Bloomberg. The rate has climbed nine basis points this month, after a 39 basis point increase in 2013.

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