Baht drops most in six weeks

Baht drops most in six weeks

Thailand's baht fell the most in six weeks on concern anti-government protests will continue to crimp economic growth.

Gross domestic product increased 0.6% in the last three months of 2013, the least since the first quarter of 2012, official data showed Monday. Protest leader Suthep Thaugsuban called on supporters on Monday to join what he called the "final battle" against caretaker Prime Minister Yingluck Shinawatra tomorrow. The baht touched a two-month high on Tuesday and its 14-day relative strength index reached 28 on Monday, below the 30 threshold that suggests to some traders a turnaround is likely.

"The impact on the economy from the protests will be quite severe in the current quarter," said Toru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc in Tokyo. "For the baht to see further appreciation from here, we need much better news like the ending of the demonstrations. From a technical perspective, the baht seems to be overbought."

The baht dropped 0.5%, the most since Jan 2, to 32.43 per United States dollar as of 9.21am in Bangkok, according to data compiled by Bloomberg. It touched 32.207 earlier, the strongest level since Dec 19. The currency has weakened 4% since the end of October, when the protests began.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell seven basis points, or 0.07 percentage point, to 6.27%.

The economy grew 2.9% in 2013, compared with a revised 6.5% the previous year, according to the data released on Monday. The growth was in line with the central bank's expectations and current monetary policy is accommodative, Bank of Thailand spokeswoman Roong Mallikamas said Monday.

The yield on the 3.125% government bonds due December 2015 was steady at 2.35%, data compiled by Bloomberg show. The yield has dropped 24 basis points this year.

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