Baht weakens to three-year low

Capital outflows rising on possible US stimulus, for all regional currencies so Thailand not alone.

INTERNATIONAL TRADE & FINANCE 

Baht weakens to three-year low

Capital outflows rise on Fed stimulus concerns

22/08/2013

Post Reporters

The baht fell below 32 to the US dollar Thursday, a three-year low, while the stock market sank at one point to its lowest intraday level since last November.

Capital outflows are rising after the minutes from last month's US Federal Reserve meeting showed officials support a stimulus easing this year should the US economy improve.

The local currency slid to its weakest level since August 2010, the first time it dipped below 32 since July 2012, said Bloomberg. The baht fell to 32.09/32.13 to the greenback and has dropped about 5% this year.

Other Asian currencies struggled, with the ringgit falling to its lowest level in more than three years, the Philippine peso weakening to a two-month low, Indonesia's rupiah diving to its lowest level since April 2009 and India's rupee slumping to an all-time low.

The rupiah fell by 0.4% to 10,818 to the dollar, while the rupee slid to 65.56.

Fresh worries over the Fed tapering its monthly asset-buying programme and a series of weak economic data from emerging countries have caused foreign investors to unload stocks and bonds in these markets and flee to major economies such as the US and Japan.

The SET index plunged to the day's low of 1,325.78 points Thursday before late buying stabilised the market, closing at 1,351.81 for a 0.25% drop in active trade worth 57.9 billion baht. The index has lost 7.4% the past six trading days.

Foreign investors were net sellers of 3.58 billion baht worth of Thai shares Thursday, raising net sales this month to 34.2 billion and year-to-date to 110 billion for this segment.

The Philippine Stock Exchange was the biggest loser in the region, tumbling to a five-year low as the local market resumed trading after a three-day closure. It dipped 6.9% during trading before paring losses to 5.96% at the close.

Pongpen Ruengvirayudh, a deputy governor of the Bank of Thailand, said the central bank will take necessary steps if the baht continues to depreciate at a faster pace.

But the baht remains in line with other regional currencies that experienced similar capital outflows, she said. The difference has been the speed of depreciation, as the baht faces higher volatility risk.

Concerns over growing fund outflows is one reason the central bank's Monetary Policy Committee (MPC) maintained its policy rate at 2.5% even as economic growth is slowing.

Mounting worries that the Fed will pare its easing policy at next month's meeting and disappointing Thai numbers stoked demand for the dollar, said one trader at a local bank.

"Investors who earlier bet the dollar would soon reverse its upward trend and shorted the greenback rushed to cut their losses after the dollar broke past 32, adding to the significant retreat of the baht today," said the trader, adding that the baht could continue to weaken, with resistance of 32.20 and support at 32.

Jumpon Saimala, the chief executive of CIMB-Principal Asset Management, estimates the SET could recover by 10-15% by year-end due largely to demand for long-term equity funds and retirement mutual funds for personal income tax deductions.

He said government spending, especially on megaprojects, will drive a recovery.

http://www.bangkokpost.com/news/local/365930/baht-falls-to-32-per-us-dollar