Thailand's baht fell the most in almost six weeks after US Federal Reserve Chairman Ben S Bernanke said the central bank may taper stimulus measures this year if the United States economy improves further. Government bonds were steady.
The Federal Open Market Committee on Wednesday left the monthly pace of bond purchases unchanged at US$85 billion, while saying that "downside risks to the outlook for the economy and the labor market" have diminished.
Global funds pulled $2.7 billion from Thai bonds and equities since May 22, when Bernanke signalled a reduction in measures know as quantitative easing that have spurred demand for emerging-market assets. The Bank of Thailand can handle capital outflows given the size of foreign reserves, governor Prasarn Trairatvorakul said June 17.
The baht slumped 1.1% to 31.05 per dollar as of 8.35am Thursday in Bangkok, the biggest slide since May 10, data compiled by Bloomberg show. The currency reached 31.08 earlier, within 0.4% of a nine-month low of 31.19 level touched on June 12. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 13 basis points, or 0.13 percentage point, to 8.08%.
"Bernanke hinting at the timing of the reduction in the quantitative easing is leading to dollar purchases across the board," said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. "But concern about intervention is growing if the baht weakens sharply beyond 31."
Governor Prasarn said last week the central bank sold "a certain amount of dollars". The authority's reserves stood at $176.5 billion on June 7, up 2.7% from a year earlier, Bank of Thailand data show.
The government sees no need to implement measures to stem outflows, Somchai Sujjapongse, director-general of the Finance Ministry's Fiscal Policy Office, said June 14. Money will eventually flow back, he said.
The yield on the 3.625% government bonds due June 2023 was little changed at 3.78%, according to data compiled by Bloomberg.