Thai Baht, Stocks Slump on Fed Taper Bets, Political Concern

Thailand’s baht fell to a two-month low as stocks and government bonds slumped after minutes of the Federal Reserve’s October meeting showed stimulus could be cut in the “coming months.”

The baht depreciated the most in two months amid concern political unrest in Thailand will subdue economic growth. The SET Index slid 2.1 percent to close at the lowest level since Sept. 6.

The Constitutional Court ruled against the government’s attempt to establish a fully elected Senate yesterday, saying the change would undermine its role as a check-and-balance on the lower house. Supporters and opponents of the government called for separate rallies on Nov. 24, according to a government website.

“The market’s interpretation is that the timing of the tapering is brought forward, which is negative for emerging-market currencies,” said Pareena Phuangsiri, a Bangkok-based analyst at Kasikornbank Pcl. “For domestic issues, there seem to be big protests this weekend and investors are still worried about the political risk in Thailand, weighing on the baht.”

The baht weakened 0.5 percent, the most since Sept. 23, to 31.817 per dollar as of 4:56 p.m. in Bangkok, according to data compiled by Bloomberg. It touched 31.83, the weakest level since Sept. 17. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell two basis points to 5.85 percent.

Taper Talk

The Fed expects economic data to signal continued improvement in the job market and “thus warrant trimming the pace of purchases in coming months,” according to the minutes released yesterday. Fed Bank of St. Louis President James Bullard also stoked tapering speculation, saying a reduction in bond buying is possible in December.

Southeast Asia’s second-largest economy grew 2.7 percent last quarter, the slowest pace since the first three months of 2012, official data showed Nov. 18. The government cut its 2013 expansion forecast the same day to 3 percent from a range of 3.8 percent to 4.3 percent projected in August.

The yield on the 3.625 percent sovereign bonds due June 2023 increased eight basis points, or 0.08 percentage point, to a two-month high of 4.22 percent, data compiled by Bloomberg show.

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