The baht dropped, capping its biggest weekly loss since 2013, as the Bank of Thailand eased curbs on fund outflows a day after unexpectedly cutting interest rates.
The central bank will raise limits on foreign-currency deposits at domestic banks and on overseas property investments, assistant governor Chantavarn Sucharitakul told a briefing on Thursday. It will also allow local investors to invest directly overseas and non-residents will be able to borrow more baht from local banks, he said.
“The central bank’s new currency measures and interest-rate reduction will accelerate the baht’s weakness faster than the market had expected,” Pimonwan Mahujchariyawong, an economist at Kasikorn Research, said by phone. “The strong currency makes it harder for exporters.”
The baht weakened 0.3% to 32.965 a dollar as of 4.16pm, extending its weekly decline to 1.2%, data compiled by Bloomberg show. That was the biggest drop since December 2013. The country’s financial markets will be closed tomorrow for the labor day holiday.
Overseas investors on Wednesday sold a net 10.5 billion baht of Thai bonds, the biggest outflow since August 2013, Thai Bond Market Association data show. They also withdrew 2.9 billion baht from domestic equities, the heaviest net selling since Feb 25, according to figures from the Stock Exchange of Thailand.
The central bank on Wednesday unexpectedly trimmed its policy rate by a quarter of a percentage point to 1.5% to support the economy. The cut came after the Finance Ministry reduced its growth forecast for this year to 3.7% from an earlier estimate of 3.9% on a slump in exports and domestic consumption. The current-account surplus shrank to US$2.22 billion in March, from $3.5 billion in February, data showed Thrusday.
Thailand’s economy expanded at its weakest pace in three years in 2014 and has struggled to recover, with exports falling for a third month in March and consumer confidence dropping to a nine-month low. The ministry cut the 2015 export growth forecast to 0.2% from 1.4%.
Sovereign 10-year bonds rose for the first time in four days, pushing their yield down by five basis point to 2.51%. For the week, the yield was little changed. The one-year interest-rate swap dropped 11 basis points, or 0.11 percentage point, to 1.46%, the lowest since 2010.