Thai Baht Erases Post-Coup Loss as Junta Ends Months of Protests

Thailand Martial Law
Motorists drive past Royal Thai Army soldiers stationed near luxury hotels on Ratchadamri Road in central Bangkok, Thailand, on Tuesday, May 20, 2014. Photographer: Dario Pignatelli/Bloomberg

Thailand’s baht rose, erasing its losses since a May 22 coup, as an end to seven months of street protests and a planned pickup in government spending help attract overseas funds to the nation’s assets.

Military rulers led by Army Chief Prayuth Chan-Ocha suspended the constitution and used powers under martial law to ban political activities. At the same time, they have vowed to accelerate budget spending and restarted payments to farmers under a disputed rice-purchase program. Global funds pumped $561 million into Thai stocks and bonds this month through yesterday, after pulling $2.24 billion out in May, exchange data show.

“With the military coup, the perception is there’s a bit of stabilization,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore. “At least there’s not going to be an immediate, imminent and uncontrollable bloodshed on the streets. That I think led to a bit of a buyback opportunity” for the baht, he said.

The baht rose 0.2 percent to 32.395 per dollar as of 3:52 p.m. in Bangkok, headed for a 0.3 percent weekly advance, according to data compiled by Bloomberg. The currency had traded at 32.40 immediately prior to the May 22 coup. The SET Index of shares gained 0.1 percent, while the yield on 10-year government bonds increased four basis points to 3.89 percent.

One-month implied volatility, a measure of expected exchange-rate moves used to price options, dropped 42 basis points to 4.96 percent. The gauge declined 61 basis points this week.

Forecast Recovery

The Thai economy will start to recover this quarter and gain more momentum in the three months through September as local demand improves in line with easing political concerns, Don Nakornthab, director for Bank of Thailand’s macroeconomic policy, told reporters in Bangkok on June 10.

Gross domestic product fell 0.6 percent in the first quarter from a year earlier, compared with the median estimate in a Bloomberg survey for a 0.4 percent increase. The economy shrank 2.1 percent from the previous three months.

Thailand’s monetary policy is accommodative and will help support the nation’s economic recovery, central bank Governor Prasarn Trairatvorakul told reporters yesterday. The Bank of Thailand, which has cut the benchmark interest rate three times in the past year to 2 percent, will next review borrowing costs on June 18.

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