Caretaker Prime Minister Yingluck Shinawatra said on Wednesday an election set for Feb 2 will proceed even as anti-government protesters blockade Bangkok for a third day demanding her removal. Gunfire was reported and two people were injured near a rally at Phatumwan intersection, Bangkok Emergency Medical Service said on its website.
"We are seeing protest scenes on the television frequently, and that gives the impression the situation is quite tense,'' said Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities Inc in Tokyo. "We all know there's political unrest in Thailand and sentiment remains weak for the baht and Thai assets.''
The local currency declined 0.4%, the most since Jan 2, to 32.878 per dollar as of 4.40pm, according to data compiled by Bloomberg. The baht, which touched the lowest level since 2010 of 33.148 on Jan 6, may fall to 33 this week, Mr Soma said.
One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, rose two basis points, or 0.02 percentage point, to 7.24%t. The SET Index of shares dropped 1.5% to 1,277.03, snapping a two-day gain.
"Thai equities will be clouded further by the political turmoil,'' said Poramet Tongbua, strategist at Bualuang Securities Plc.
The yield on the 3.625% government bonds due June 2023 fell five basis points to 4.02%, according to data compiled by Bloomberg. The rate has climbed nine basis points this month, after a 39 basis point increase in 2013.