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Baht further slides against $

FALLING TO a one-year low yesterday at 31.82, the baht has suffered from depreciation against the US dollar along with most emerging-market currencies.

Compared with this year's peak of 28.62, registered on April 19, the baht has fallen by 11.18 per cent. It has weakened by 4 per cent from 30.60 at end-2012.

Foreign investors are pulling money out of developing economies amid speculation that the US Federal Reserve will pare stimulus that has fuelled demand for emerging-market assets.

Investors pulled US$8.4 billion from developing-nation exchange-traded funds this year as economies from Indonesia to India weakened while the Fed is pulling out of its quantitative-easing programme. At press time, the Federal Open Market Committee's minutes of its July meeting had not yet been published. A Bloomberg survey of economists found that 65 per cent of respondents predicted the Fed would taper bond purchases next month.

Data showed that net-sells of Thai bonds this month have reached $530 million or nearly Bt16.9 billion. Meanwhile, after the single-day net-sell of Bt11.4 billion in Thai stocks on Tuesday and then Bt5.7 billion yesterday, year to date, foreign net-sells of Thai shares reached Bt106.7 billion.

"Basically, sentiment for emerging-market assets is weak due to speculation about the Fed's tapering," Tsutomu Soma, a manager of the fixed-income business unit at Rakuten Securities Inc in Tokyo, told Bloomberg. "Funds are flowing out from emerging markets. On top of that, Thailand's growth concerns are adding downward pressure."

A day after the National Economic and Social Development Board announced the second-quarter economic data on Monday, the baht fell from 31.20 to 31.53. The currency yesterday dropped 0.5 per cent to 31.82 per dollar as of 3.41pm in Bangkok after touching 31.83 earlier, the weakest level since July 2012, according to data compiled by Bloomberg.

Thailand, RP in better shape

Darren Buckley, head of Citibank Thailand, said outflows from Thailand should not be as bad as in India and Indonesia. Some markets such as Thailand and the Philippines are in a better shape to withstand external challenges and the situation should not be as bad as in 1997. Thailand's foreign reserves are huge, while its financial sector is much stronger.

Elsewhere, the plunge for some currencies has been steep.

India's ailing rupee hit a new record low yesterday after the central bank's plans to inject 80 billion rupees into financial markets failed to calm investor jitters. The rupee, the worst-performing Asian currency this year, fell to 64.60 to the dollar (2.02 per baht) in late-afternoon trade, down from its previous all-time low of 64.13 reached on Tuesday.

The Brazilian real has fallen by a similar amount, hitting 2.4282 to the dollar (7.34 to Bt100), a rate unseen since March 2009. On Tuesday, it dipped to the lowest level in four years, hurt by market expectations of higher US interest rates. On Monday, the Brazilian currency closed at 2.4169 to the greenback, trading above the 2.4 mark for the first time since March 3, 2009.

The Turkish lira has fallen by around 10 per cent since a February peak. The central bank on Tuesday unexpectedly raised its overnight lending rate by 50 basis points to 7.75 per cent.


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