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Baht falls with stocks as risk aversion overshadows rate review

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The baht fell with stocks rose as global risk aversion overshadows the Bank of Thailand's interest-rate review, with policy makers forecast to make no change for a sixth straight meeting.

[BANGKOK] The baht fell with stocks rose as global risk aversion overshadows the Bank of Thailand's interest-rate review, with policy makers forecast to make no change for a sixth straight meeting.

The currency is one of the few in emerging markets that are rising this year after its biggest annual loss since 2000. Data last week showed the surplus in the broadest measure of trade beat estimates and manufacturing climbed in December by the most in five months.

While Indonesia cut rates this year and the Bank of Japan took its benchmark to negative, Thailand is increasing spending on infrastructure to bolster growth. All 23 economists surveyed by Bloomberg see the 1.5 per cent policy rate on hold Wednesday.

"The baht weakened and bonds advanced amid risk-off sentiment triggered by declines in oil prices," said Kozo Hasegawa, Bangkok-based currency trader at Sumitomo Mitsui Banking Corp.

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"There's not much scope for yields to climb from here because of the sluggish economic outlook."

The baht dropped 0.2 per cent to 35.816 a dollar as of 10:15 am in Bangkok, adding to Tuesday's 0.4 per cent decline, data compiled by Bloomberg show.

Oil resumed its slide, sparking a selloff in US and European shares overnight. The SET Index of Thai equities lost 0.3 per cent.

So far in 2016, the Thai currency has gained 0.8 per cent, the third-best performance among 24 emerging-market exchange rates tracked by Bloomberg behind the Hungarian forint and Malaysian ringgit.

The nation's bonds have attracted a net US$1.4 billion of inflows this year, while US$259 million has been pulled from stocks.

While the government has cut this year's growth forecast to 3.7 per cent from 3.8 per cent, the finance ministry estimates tourist arrivals will rise 10.5 per cent to a record 33 million.

Thai bonds rose amid demand for the relative safety of government debt. The 10-year yield fell three basis points to 2.28 per cent and is down 24 basis points in 2016, according to data compiled by Bloomberg.

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