Baht, bonds head for weekly declines

Thailand's baht headed for a fourth weekly slide and the 10-year bonds fell as anti-government protests since October prompted global investors to cut holdings.

The currency traded near its 2010 low, while yields rose the most since November as global funds pulled a net US$129 million from Thai bonds in January.

Demonstrations scheduled next week in parts of central Bangkok may cost the economy as much as 1 billion baht ($30 million) a day, according to a survey by the University of the Thai Chamber of Commerce. The political unrest and the Federal Reserve's stimulus reduction may extend outflows, Bank of Thailand deputy governor Pongpen Ruengvirayudh said on Wednesday.

"While the Fed's tapering is weighing on emerging-market assets as a whole, Thailand is seeing more downward pressure due to the unrest," said Koji Fukaya, chief executive officer and currency strategist at FPG Securities Co in Tokyo. "The baht and the Thai assets look relatively weak, and the outlook is bearish for the time being."

The baht declined 0.1% this week to 33.037 per dollar and reached 33.148 on Jan 6, the weakest level since 2010, data compiled by Bloomberg show. It was steady on Friday.

The yield on the 3.625% debt due June 2023 climbed 19 basis points from a week ago, the most since the five days through Nov 1, to 4.08% as of 8.17am in Bangkok, according to data compiled by Bloomberg. The rate, unchanged on Friday, was at a one-month high.

Security officials and demonstrators should avoid clashes, Winthai Suvaree, the deputy army spokesman, said on Thursday, as anti-government groups plan to widen their protest in Bangkok next Monday, blocking off some major intersections to pressure caretaker Prime Minister Yingluck Shinawatra to delay the Feb 2 election to allow time for political reforms to take place.

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, increased 15 basis points from a week ago to 7.02%. It dropped 20 basis points, or 0.2 percentage point, on Friday.

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