Thai Baht Declines Most in Seven Weeks After Unexpected Rate Cut

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The baht extended losses and headed for its biggest decline in seven weeks after the Bank of Thailand unexpectedly cut interest rates for a second straight meeting.

The benchmark one-day bond repurchase rate was lowered by a quarter of a percentage point to 1.5 percent, with monetary policy committee members voting five-to-two in favor. Only two of the 20 economists surveyed by Bloomberg had predicted the decision, which came after the finance ministry earlier Wednesday cut its economic growth forecast for this year to 3.7 percent from an earlier estimate of 3.9 percent.

The baht weakened 0.6 percent to 32.788 a dollar as of 3:46 p.m in Bangkok, set for its biggest drop since March 11, data compiled by Bloomberg show. The currency touched 32.835 earlier, its lowest level since March 19. The one-year interest-rate swap slumped 15 basis points, or 0.15 percentage point, to 1.575 percent, the lowest since 2010.

“Lower interest rates will help weaken the currency, which is needed to help the export sector,” Chavinda Hanratanakool, chief executive officer at Krung Thai Asset Management Pcl, said by phone from Bangkok. “The rate cut should bolster sentiment among businesses and consumers.”

Thailand’s economy expanded at its weakest pace in three years in 2014 and has struggled to recover, with exports falling for a third month in March and consumer confidence dropping to a nine-month low. The finance ministry cut the 2015 export growth forecast to 0.2 percent from 1.4 percent.

Sovereign 10-year bonds declined for a third day, pushing their yield up by one basis point to 2.56 percent. The benchmark SET Index of shares lost 0.9 percent, heading for its lowest close this month.

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