Baht weakens most since January

Thailand's baht fell the most since January and bonds dropped on Federal Reserve Chair Janet Yellen's comment that interest rates could be raised "around six months" after the central bank ends its stimulus program.

The Fed announced another US$10 billion reduction of its monthly bond buying on Wednesday to $55 billion and said the purchases could end this fall. The Bank of Thailand reduced its key rate on March 12 to 2% from 2.25%after prolonged political unrest curbed local demand and hurt tourism. The Southeast Asian nation has room to ease policy further and whether the Bank of Thailand will cut or not depends on economic data, spokeswoman Roong Mallikamas said March 14.

"The prospect of a US rate hike is dollar-positive and weighs on emerging-market currencies," said Koji Fukaya, chief executive officer and foreign-exchange strategist at FPG Securities Co in Tokyo. "With lingering political unrest that hurts growth, there remains speculation Thailand may cut further."

The baht slumped 0.6%, the most since Jan 2, to 32.343 per dollar as of 8.37am in Bangkok, according to data compiled by Bloomberg. It rallied 1% over the previous five days. The currency has weakened 3.8% since anti-government protests began on Oct 31. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, was little changed at 6.52%.

Sluggish growth

The Constitutional Court will meet on Friday to consider a petition seeking to annul the country's Feb 2 general election, court president Charoon Intacharn told reporters in Bangkok on Wednesday. Demonstrators will continue protests until caretaker Prime Minister Yingluck Shinawatra gives up power, anti-government protest leader Suthep Thaugsuban told supporters this week.

Thailand's economy may record zero growth or contract this year should the unrest continue, Thai Chamber of Commerce Chairman Isara Vongkusolkit said March 18 in Bangkok. Expansion is forecast at 2% to 3% in 2014 if a new government can be formed in the third quarter, he said.

The yield on the 3.625% sovereign bonds due June 2023 rose one basis point, or 0.01 percentage point, to 3.7%, data compiled by Bloomberg show.

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