Thailand's baht dropped to a seven-week low and bonds fell as anti-government protests sparked by an amnesty bill dim the outlook for the economy and prompt overseas investors to pull funds from the country's assets.
The demonstrations against the bill granting amnesty for political offences are beginning to impact the economy, with tourism and investor confidence the most affected, Bank of Thailand governor Prasarn Trairatvorakul said at a seminar in Bangkok on Sunday. The Senate is scheduled to begin voting on the legislation at 10am on Monday. Most emerging-market currencies in the region fell as improved United States jobs data boosted speculation the Federal Reserve will cut stimulus this year.
"While external factors are dollar-positive, Thailand's growing political risk gives more reasons for foreigners to stay away from Thai assets," said Koji Fukaya, chief executive officer and currency strategist at FPG Securities Co in Tokyo. "The impact on the economy is a major concern at this point. Investors are cautious about the baht and the assets."
The baht depreciated 0.4% to 31.61 per dollar as of 8.46am in Bangkok and reached 31.63, the weakest level since Sept 19, according to data compiled by Bloomberg. The currency dropped 0.9% last week.
One-month implied volatility in the baht, a measure of expected moves in exchange rates used to price options, climbed 19 basis points, or 0.19 percentage point, to 6.06%.
Fund Outflows
Global funds pulled a net $876 million from Thai bonds and equities this month through Nov 8, official data show. The SET (SET) Index of shares slid in each of the last three weeks, sliding 1.7% to 1,405.03 in the period ended Nov 8.
Thai police said they will tighten security around the country's parliament in Bangkok on concern protesters will use Monday's Senate vote on the amnesty bill as a pretext to incite violence and destabilizse the government. “Groups will try to step up protests and create chaos," police spokesman Piya Uthayo said on Sunday, adding that authorities would not use force to disperse the rallies unless demonstrators threatened to enter restricted areas.
Wells Fargo's Advantage International Bond Fund has sold its holdings of Thai sovereign bonds on concern uncertainty surrounding the fate of the government's amnesty bill will deter fund inflows, Lauren van Biljon, a London-based analyst for the fund, said in a Nov 5 interview.
The yield on the 3.625% bonds due June 2023 increased nine basis points to 4.06%, data compiled by Bloomberg show. It was headed for the highest close since Sept 18.