Baht Posts Worst Weekly Drop Since October on Rate Surprise

Thailand’s baht had its biggest weekly decline since October after the central bank unexpectedly cut interest rates, reducing the appeal of the nation’s bonds as the U.S. prepares to tighten policy.

The Bank of Thailand lowered its one-day bond repurchase rate to 1.75 percent from 2 percent on Wednesday. Six economists surveyed by Bloomberg predicted the decision, while 16 forecast no change. Global funds sold a net $629 million of Thai debt this week through Thursday, poised for the biggest weekly outflow since August, Thai Bond Market Association data show.

“The central bank’s move really shocked the market and significantly weakened the baht,” said Thammarat Kittisiripat, a Bangkok-based analyst at TMB Bank Pcl. Overseas investors will sell Thai debt “before the U.S. interest rate starts to rise,” he said.

The baht weakened 0.9 percent from March 6 to 32.859 a dollar as of 4:22 p.m. in Bangkok, according to data compiled by Bloomberg. It dropped 0.2 percent Friday and reached a two-month low of 32.980 on Thursday.

Ten-year government bonds dropped this week, with the yield rising eight basis points, or 0.08 percentage point, to 2.74 percent. Similar-maturity U.S. Treasury yields fell 11 basis points from March 6 to 2.13 percent.

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