Baht heads for biggest monthly drop since 2011 on stock outflows

A tourist looks at an electronic board displaying exchange rates in Bangkok on July 27, 2015.
A tourist looks at an electronic board displaying exchange rates in Bangkok on July 27, 2015. PHOTO: AFP

BANGKOK (BLOOMBERG) - The baht was poised for its biggest monthly loss since 2011 after the government cut forecasts for growth and exports, spurring outflows from Thai equities as the US prepares to raise interest rates.

The economy is slowing as Prime Minister Prayuth Chan-Ocha, who seized power in a military coup in May 2014, fails to spur a revival and as planned investment in infrastructure falls short of target. While overseas investors sold a net US$856 million (S$1.18 billion) of stocks in July, the most since May 2014, an index of sovereign bonds rose, suggesting demand for the relative safety of debt.

"The baht has fallen in line with a strong dollar," said Tsutomu Soma, department manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo. "Thai political uncertainties are also weighing on investor confidence."

The currency dropped 3.9 per cent from June 30 to 35.130 per US dollar as of 10:18 a.m. in Bangkok, Bloomberg-compiled data show. It fell 0.2 per cent on Friday and earlier reached 35.225, the lowest level since May 2009.

Thailand's government is under increasing pressure to overhaul the cabinet and bolster the economy as waning consumer confidence and a slump in manufacturing portend one of the region's slowest expansions, according to analysts.

The economy may grow 3 per cent in 2015, the finance ministry said on July 28, down from an April estimate of 3.7 per cent. Exports contracted for five straight months through May and figures for June from the Bank of Thailand are due around 2:30 p.m. local time Friday.

A Bloomberg index of Thai sovereign bonds gained 0.9 per cent in July, halting a two-month drop. The three-year yield declined 17 basis points from June 30 to 1.6 per cent and the 10- year yield fell 12 basis points to 2.84 per cent.