Thai Baht Has Worst Quarter Since 2008 as Fed Triggers Outflows

The baht had its worst quarter since 2008 as overseas investors cut holdings of Thai bonds and stocks on the prospect of the Federal Reserve phasing out stimulus that fueled demand for emerging-market assets.

The yield on 10-year government bonds increased in June by the most since March 2012 as global funds pulled $2.6 billion from Thai debt and equities, official data show. Fed Chairman Ben S. Bernanke said last week that bond-buying, known as quantitative easing, could be reduced this year and ended in 2014. The finance ministry cut its 2013 growth forecast yesterday to 4 percent to 5 percent, compared with a previous range of 4.8 percent to 5.8 percent, amid concern the economy of China, Thailand’s largest export market, is slowing.

“With concern about the Fed’s reduction in quantitative easing, fund outflows accelerated and that weighed on the baht,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Concern about China’s economy is also growing and that’s also negative for the baht.”

The baht slumped 5.7 percent this quarter, the most since the three months through June 2008, to 31.02 per dollar as of 3:54 p.m. in Bangkok, data compiled by Bloomberg show. The currency, which dropped 2.2 percent this month, touched 31.25 on June 21, the weakest level since Sept. 7. It climbed 0.6 percent today.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 255 basis points, or 2.55 percentage points, this quarter to 7.77 percent. It rose 121 basis points this month and seven basis points today.

Exports Fall

Manufacturing production dropped 7.8 percent in May after falling 4.2 percent the previous month, the Office of Industrial Economics said today. Central bank data today showed exports decreased 5.1 percent last month, after a gain of 3.7 percent in April, while the nation posted a current-account deficit of $1.1 billion.

The yield on the 3.625 percent bonds due June 2023 rose 23 basis points from the end of March to 3.77 percent, the largest quarterly increase since the first three months of 2012, according to data compiled by Bloomberg. The rate advanced 26 basis points this month and declined six basis points today.

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