Thai Baht Drops Most This Week Since May on Growth Outlook, Fed

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Thailand’s baht recorded its biggest weekly decline since May as the government cut its forecast for economic growth and the Federal Reserve said it’s on track to raising interest rates this year.

Southeast Asia’s second-biggest economy may expand 3 percent in 2015, slower than an April estimate of 3.7 percent, as exports struggle to recover, Finance Minister Sommai Phasee said Wednesday. A drought linked to the El Nino weather pattern presents a “downside risk” to the government’s projection, Bank of Thailand Governor Prasarn Trairatvorakul said the following day.

The baht weakened 0.6 percent from July 10, the biggest decline since the five days through May 29, to 34.149 a dollar as of 4:01 p.m. in Bangkok, according to data compiled by Bloomberg. The currency rose 0.2 percent Friday, rebounding from a six-year low of 34.24 reached earlier.

“The baht’s outlook remains weak as the drop in exports and domestic consumption has derailed the economic recovery,” said Kobsidthi Silpachai, head of capital markets research at Kasikornbank Pcl. “Higher possibility of a U.S. interest-rate increase will also put pressure on the currency.”

A gauge of dollar strength was headed for a fourth weekly advance after climbing to a three-month high on Thursday. Fed Chair Janet Yellen reiterated this week that U.S. borrowing costs will rise in 2015, a move that could reduce the allure of emerging-market assets.

Thai exports dropped for a fifth straight month in May. Overseas shipments may contract 1.3 percent this year, Minister Phasee said on Wednesday. Kasikornbank predicts the baht will weaken to 34.50 a dollar in the second half.

Thailand’s three-year sovereign bonds posted a second weekly gain, with the yield falling two basis points to 1.61 percent, data compiled by Bloomberg show. The 10-year yield rose three basis points from July 10 to 2.85 percent, halting a two-week advance for the notes.

Short-term yields may drop further as the economy slows, Tada Phutthitada, president of the Thai Bond Market Association, said on Thursday.

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