Thai Baht Drops on China Slowdown as Market Waits for Fed Clues

Thailand’s baht dropped by the most in two weeks and bonds fell as a slowdown in China dimmed regional growth prospects and investors waited for U.S. jobs data for clues on whether the Federal Reserve will cut stimulus.

Manufacturing declined by more than estimated in China, Thailand’s biggest export market, and home sales in the U.S. rose to a five-year high, according to reports yesterday. The number of people in the world’s largest economy continuing to claim jobless benefits decreased by 89,000 in the week to July 13, according to the median estimate in a Bloomberg survey before data due today, which may bolster the case for the Fed to reduce bond buying that’s boosted fund flows to Asia.

“Weakening growth prospects in Asia on the weak China PMI yesterday” weighed on regional currencies, said Wee-Khoon Chong, a Hong Kong-based strategist at Societe Generale SA. “All eyes will be on claims data later today.”

The baht declined 0.4 percent, the most since July 8, to 31.08 per dollar as of 3:09 p.m. in Bangkok, according to data compiled by Bloomberg. It reached 31.10 earlier, the weakest level since July 19. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 14 basis points, or 0.14 percentage point, to 6.35 percent.

A Purchasing Managers Index from HSBC Holdings Plc and Markit Economics yesterday showed a preliminary reading for Chinese factory output of 47.7 in July, compared with a forecast for 48.2. China took 12 percent of Thai exports in the first five months of 2013, official data show.

Thai overseas sales rose 1.6 percent in June from a year earlier after a 5.3 percent drop the previous month, according to the median forecast of economists in a Bloomberg survey before customs data due tomorrow.

The yield on the 3.625 percent bonds due June 2023 increased one basis point to 3.86 percent, the highest level since June 26, according to data compiled by Bloomberg.

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