Baht set for biggest weekly decline since May

BANGKOK, July 24 — Thailand’s baht headed for the biggest weekly drop in almost three months as global funds reduced holdings of local stocks and bonds amid an economic slowdown and the probability of interest-rate increases in the US.

Overseas investors sold a net US$156 million (RM594.867 million) of Thai shares this week as the benchmark SET Index slumped to a 13-month low.

They withdrew US$24 million from bonds, setting the stage for the first weekly outflow since the period ended July 3, according to data compiled by Bloomberg.

The baht fell 2 per cent from July 17 and 0.5 per cent today to 34.89 a dollar as of 9:52 a.m. in Bangkok, Bloomberg-compiled data show. The currency is on course for the biggest weekly loss since the beginning of May.

“Additional outflows of foreign funds will continue to put pressure on the baht toward the key support level of 35,” said Komsorn Prakobphol, an investment strategist at Tisco Financial Group Pcl in Bangkok. “The economy remains very weak, while most economic data point to robust growth in the US”

Thailand’s economy, Southeast Asia’s second biggest, may expand 3 per cent in 2015 as exports falter, Finance Minister Sommai Phasee said on July 15. That’s down from an estimate of 3.7 per cent in April. Federal Reserve Chair Janet Yellen reiterated last week that US borrowing costs will rise in 2015, a move that could cut the allure of emerging markets.

The Bank of Thailand is closely monitoring the baht because a rapid weakening may make it difficult for the economy to adjust, Assistant Governor Chantavarn Sucharitakul said yesterday.

One-month implied volatility in the baht, a measure of expected exchange-rate swings used to price options, jumped 111 basis points this week, the most in three months, according to data compiled by Bloomberg. The measure climbed 37 basis points today to 6.53 per cent.

Thailand’s three-year sovereign bonds headed for the first weekly drop in three weeks with the yield rising one basis point to 1.62 per cent, data compiled by Bloomberg show.

The 10-year yield fell two basis points to 2.83 per cent. — Bloomberg