Baht, bonds fall amid political tensions

The baht dropped to its lowest level since 2010 as overseas funds pulled cash from Thailand's debt amid the two-month-long political protests that are sapping investor confidence.

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Demonstrators plan to surround government ministries and occupy 20 major traffic intersections in Bangkok on Jan 13 until caretaker Prime Minister Yingluck Shinawatra agrees to step down and allow an unelected council to reform the electoral system, Suthep Thaugsuban, a former Democrat Party MP who is leading the movement, said last week.

Thai bonds declined as official data showed global funds sold US$104 million more local fixed-income securities than they bought on Jan 3.

"There will be more to come on the political side and foreign investors still prefer to buy the dollar amid political concern," said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl. "The baht and Thai assets will probably remain weaker until next week."

The baht depreciated 0.4% to 33.12 per dollar as of 9.03am in Bangkok, the weakest level since 2010, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 20 basis points, or 0.20 percentage point, to 7.12%.

The Stock Exchange of Thailand index dropped 5.7% this year to reach the lowest level last week since August 2012. That adds to a 6.7% decline in 2013, the worst annual performance since a 48% drop in 2008.

The Election Commission (EC) proposed delaying planned polls to around April or May from Feb 2 while reforms are carried out to ease political tensions, Commissioner Somchai Srisuthiyakorn said Jan 3. The protesters said they will shut down large parts of Bangkok starting Jan 13 to pressure the government to delay the election.

The yield on the 3.875% sovereign bonds due June 2019 rose two basis points to 3.37%, according to data compiled by Bloomberg. The government plans to sell 15 billion baht ($454 million) of 28-day bills on Monday.

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