The Nation



Baht slides 3.2% in Nov, trailing only Indian rupee

The slump in the value of the baht last month was one of Asia's most severe, with only the Indian rupee dipping faster, according to the Bank of Thailand.

While the outflow of foreign capital was a major cause of the baht's depreciation against the US dollar, the BOT expressed its ability to deal with the pressure on the currency, which has been aggravated by local political developments and the economic situation.

Chantavarn Sucharitakul, the central bank's assistant governor for the Financial Market Operations Group, said the baht depreciated by 3.2 per cent in November, the fastest slide in Asia after the rupee's 6-per-cent drop.

"In this period, we have seen more depreciation than by the [baht's] regional peers," she said. "In early November, there was a possibility of tapering by the US Federal Reserve of its quantitative easing, which prompted other currencies to weaken against the strengthening US dollar. Later, unsatisfactory third-quarter economic figures and the local developments caused the baht to weaken consistently."

Last month, about US$3.3 billion (Bt106 billion) worth of capital fled Thailand's bond and stock markets. As of November 28, about $1.5 billion had flowed out of the Stock Exchange of Thailand and, as of November 21, about $1.8 billion moved out of the bond market, which weakened the baht to about 32 per dollar.

The BOT has not expressed much concern over the current depreciation, given its experience with rapid slumps in the past.

So far this year, the low point for the Thai currency was 32.48 per dollar on September 6.

"When the Fed signalled a possibility of QE tapering, a large amount of capital fled [out of Thailand]. About $3 billion flowed out in May and June, and $3 billion in August alone. We have some experience in dealing with capital outflows," Chantavarn said.

She said external factors, particularly the Fed's movements, continued to put the most pressure on the baht, though there had also been some impact from the local political developments.

The central bank has been closely monitoring money markets and is ready to take action if necessary, she said.

Chantavarn declined to comment on whether drops in Thailand's foreign reserves resulted from the BOT's intervention, explaining that there could be several causes, including reductions in asset values and currencies.

The baht yesterday depreciated 0.3 per cent to 32.14 per US dollar after reaching 32.285 earlier, the weakest since September 9, according to Bloomberg.

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