Baht and bonds fall on election fears

The baht headed for its worst week in almost a month and government bonds dropped after global funds pulled money from local assets amid concern this weekend’s election will turn violent.

Caretaker Prime Minister Yingluck Shinawatra is deploying 10,000 police in Bangkok alone for the Feb 2 poll, seeking to avoid a repeat of violence that obstructed advance voting on Jan 26.

The baht hit a three-week low as official data showed foreign investors sold $499 million more Thai stocks and bonds than they bought this week through Thursday. Most Asian currencies fell this week as the Federal Reserve cut stimulus that’s buoyed emerging markets.

“We have seen demand for the dollar on concern about the situation before the election,” said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank. “There’s the Fed’s tapering that caused emerging-market selloffs and plus, we have this political unrest. No one would like to put money in Thailand unless we have solutions.”

The baht dropped 0.5% this week, the most since the period ended Jan 3, to 33 per dollar as of 9.10am, according to data compiled by Bloomberg. It declined 0.1% on Friday and reached 33.024, the weakest level since Jan 13, taking the month’s loss to 0.7%.

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, rose four basis points from a week ago to 7.37%. The gauge dropped eight basis points, or 0.08 percentage point on Friday.

Street Protests

Suthep Thaugsuban, the former opposition party power-broker leading street protests, has announced plans for a march across Bangkok on the day of the vote. Ten people have been killed and 584 injured since the demonstrations began on Oct 31, according to the Bangkok Emergency Medical Service.

The Fed said this week it will trim monthly bond purchases to US$65 billion (2,080 billion baht) from $75 billion, sticking to a plan for a gradual withdrawal of stimulus.

The yield on the 3.125% debt due December 2015 rose two basis points this week to 2.44%, data compiled by Bloomberg show. The rate was little changed on Friday.

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