The baht posted its biggest three-day loss in more than six weeks on concern escalating political tensions will hurt growth at a time when investors are trimming holdings of emerging-market assets.
Overseas investors have sold US$948 million (30.8 billion baht) more Thai stocks than they bought this year and $124 million in bonds, exchange data show, as the Federal Reserve started paring stimulus that had driven capital into developing markets.
''The deteriorating political situation in Thailand is hurting the baht at a time when general sentiment for emerging-market currencies is weak,'' said Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities Inc in Tokyo. ''Technically, it was time for the baht to see a downward correction from a rally earlier this month.''
The baht fell 0.2% to 32.59 per dollar as of 3.25pm, taking the three-day decline to 1%, the biggest since Jan 6, according to data compiled by Bloomberg. The currency strengthened 1.3% this month and reached 32.207 on Tuesday, the highest since Dec 19.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose six basis points, or 0.06 percentage point, to 6.59%.
The cost of insuring Thai bonds for five years using credit default swaps climbed eight basis points on Wednesday to 146, the highest level in almost a week and above the 2013 average of 109, CMA prices show.
Thailand's 10-year sovereign bonds gained, with the yield on the 3.625% notes due in June 2023 falling three basis points to 3.81%, the lowest level since Oct 18, data compiled by Bloomberg show. The rate on two-year securities declined one basis point to 2.33%.