Baht Posts Worst Monthly Loss Since May on Protests, Rate Cut

The Thai baht had its biggest monthly decline since May and stocks and 10-year sovereign bonds fell after international funds cut holdings of the nation’s assets amid concern political unrest will hurt growth.

The Bank of Thailand unexpectedly lowered its benchmark interest rate this week as monthlong anti-government demonstrations weighed on investor confidence. Exports, which account for about two-thirds of the economy, fell 0.5 percent in October after a 6.3 percent drop the previous month, the central bank reported today.

“While economic conditions don’t look so sound, social unrest is adding to investor concerns,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “There’s some speculation of an additional rate cut, which means the latest reduction may not be enough to boost growth, and we don’t know how the protests will end.”

The baht slumped 3 percent in November and 0.9 percent this week to 32.106 as of 4:59 p.m. in Bangkok, according to data compiled by Bloomberg. The currency rose 0.1 percent today and touched 32.228 yesterday, the weakest level since Sept. 9. The SET Index of shares dropped 5 percent since the end of October, snapping a two-month rally.

Bonds Fall

Global funds sold $1.3 billion more Thai bonds than they bought this month through yesterday and pulled a net $1.5 billion from equities, official data show.

Thai anti-government protesters, backed by the main opposition Democrat party and seeking to oust the government of Prime Minister Yingluck Shinawatra, stormed the grounds of the army headquarters in Bangkok. The protesters have started leaving the compound, said Winthai Suvaree, an army spokesman.

Suthep Thaugsuban, former deputy prime minister and leader of the demonstrators, has rejected multiple offers from Yingluck for talks to ease tensions, saying that the protest won’t end until her government and the political influence of Thaksin Shinawatra have been ended.

The central bank cut its policy rate by a quarter of a percentage point to 2.25 percent on Nov. 27, a decision not expected by any of the 19 economists surveyed by Bloomberg. It also lowered the 2013 economic growth forecast to about 3 percent from 3.7 percent.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, jumped 45 basis points in November and 24 basis points this week to 6.26 percent. It fell six basis points today.

The yield on the 3.625 percent government bonds due June 2023 increased 19 basis points, or 0.19 percentage point, in November to 4.13 percent, data compiled by Bloomberg show. The rate fell eight basis points this week and was little changed today.

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