The baht had its worst drop in more than two months on concerns that slowing growth in China and Europe, Thailand's biggest export markets, will hurt the Southeast Asian economy. Government bonds also declined.
Overseas shipments probably shrank 5.8% in August from a year earlier, declining for the third month, according to the median estimate of economists in a Bloomberg survey before a government report due tomorrow. Export growth in 2012 may be lower than previously forecast, according to the minutes of the Bank of Thailand's Sept 5 meeting published on Sept 19. A Chinese manufacturing survey last week signaled an 11th monthly contraction while another report showed a gauge of euro-area services and production fell to a 39-month low.
"Weak manufacturing data from Europe and China signal demand for local exports will remain poor," said Thammarat Kittisiripat, an economist in Bangkok at TMB Bank Pcl (TMB). "It's hard to see a strong rebound before the first half of next year, as Europe continues to struggle with its debt problem and only a gradual recovery can be expected in China."
The baht fell 0.42% to 30.95 to the dollar as of 3.26pm in Bangkok, the biggest drop since July 18, according to data compiled by Bloomberg. It lost 0.2% last week, and may fall below 31 by year-end, Kittisiripat said.
One-month implied volatility, a measure of exchange-rate swings used to price options, dropped to 3.85% from 4.27% at the end of last week.
The currency extended a retreat from a six-month high of 30.66 reached on Sept 17 after a report on Monday showed German business confidence unexpectedly fell for the fifth straight month in September.
Economic Outlook
China and Europe accounted for more than a fifth of Thailand’s exports in the first seven months of this year. Thai economic growth in 2013 is "likely to be softer" than forecast, according to the minutes of the central bank's Sept 5 policy meeting.
The yield on the government's 3.65% bonds due December 2021 climbed three basis points, or 0.03 of a percentage point, to 3.69%, according to data compiled by Bloomberg. The treasury is scheduled to auction 12 billion baht ($388 million) of 2032 bonds on Sept 26.