Baht Drops to Lowest Since June 2010 on Speculation About Coup

Thailand’s baht fell to the weakest level since June 2010 in offshore trading on concern political turmoil will worsen after the nation’s army chief refused to rule out a coup following deadly street protests.

Anti-government demonstrators have been calling for the military to back their bid to oust Prime Minister Yingluck Shinawatra’s government and set up an unelected council tasked with erasing her family’s political influence. The army is at “a difficult crossroad,” Army Chief Prayuth Chan-ocha said at a Dec. 27 briefing in Bangkok. Three people were killed and more than 150 injured last week amid protests and rioting in Bangkok.

The baht dropped 0.3 percent to 32.95 per dollar as of 12:41 p.m. in Singapore, according to prices compiled by Bloomberg, and earlier touched 32.96, the lowest level since June 2010. The currency has lost 7.2 percent this year, its worst annual performance since 2000. Onshore financial markets are closed for holidays through Jan. 1.

“The baht can still depreciate further because it doesn’t seem like the political problems will be going away anytime soon,” said Leo Chan, head of regional foreign-exchange and interest-rate trading in Hong Kong at ABN Amro Bank NV. “The army could step in. As we have seen in the past, this will resolve itself peacefully but the baht could weaken some more before we eventually see that.”

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell two basis points, or 0.02 percentage point, to 6.56 percent.

The measure has risen 75 basis points since Oct. 31, when Yingluck’s opponents began street demonstrations accusing her of economic mismanagement and seeking to introduce a law that would exonerate her brother Thaksin, who was ousted as premier in a 2006 military coup. She dissolved parliament on Dec. 9.

Global funds sold $1.26 billion more Thai shares than they bought this month as Yingluck’s move to call for a snap election sparked street protests and the Election Commission urged the government to delay the Feb. 2 poll.

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