Baht Falls With Stocks as Risk Aversion Overshadows Rate Review

  • BOT keeps key rate at 1.5%, as expected by all 23 economists
  • Currency is shrugging off emerging-market losses this year

The baht fell with stocks as global risk aversion overshadowed the Bank of Thailand’s interest-rate review.

Policy makers kept borrowing costs unchanged for a sixth straight meeting, as expected by 23 economists in a Bloomberg survey. The currency is one of the few in emerging markets that are rising this year after its biggest annual loss since 2000. Data last week showed the current-account surplus beat estimates and manufacturing climbed in December by the most in five months. While Indonesia cut rates this year and the Bank of Japan reduced its benchmark to negative, Thailand is increasing spending on infrastructure to bolster growth.

“The baht weakened and bonds advanced amid risk-off sentiment triggered by declines in oil prices,” said Kozo Hasegawa, Bangkok-based currency trader at Sumitomo Mitsui Banking Corp. “There’s not much scope for yields to climb from here because of the sluggish economic outlook.”

The baht dropped 0.3 percent to 35.830 a dollar as of 2:24 p.m. in Bangkok, adding to Tuesday’s 0.4 percent decline, data compiled by Bloomberg show. Oil resumed its slide, sparking a selloff in global stocks. The SET Index of Thai equities lost 0.6 percent.

So far in 2016, the Thai currency has gained 0.7 percent, the third-best performance among 24 emerging-market exchange rates tracked by Bloomberg behind the Hungarian forint and Malaysian ringgit. The nation’s bonds have attracted a net $1.4 billion of inflows this year, while $259 million has been pulled from stocks.

While the government has cut this year’s growth forecast to 3.7 percent from 3.8 percent, the finance ministry estimates tourist arrivals will rise 10.5 percent to a record 33 million. The monetary policy stance remains accommodative and the central bank is ready to use appropriate tools if needed, it said Wednesday after the rate decision.

Thai bonds rose amid demand for the relative safety of government debt. The 10-year yield fell four basis points to 2.26 percent and is down 26 basis points in 2016, according to data compiled by Bloomberg.

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