Thailand 's baht set for worst quarter since 2013 amid outflows

[BANGKOK] Thailand's baht headed for its biggest quarterly drop since 2013 as global funds sold the nation's assets amid a deepening economic slowdown and the prospect of higher US interest rates.

Overseas investors withdrew a net US$980 million from local bonds and stocks in the quarter through Monday, according to data compiled by Bloomberg. An El Nino weather pattern that brings drought across Thailand may cut economic growth to 3 per cent, compared with an earlier estimate of 3.5 per cent, Finance Minister Sommai Phasee said last week. Ten-year government bonds are poised for their worst quarter since 2012.

"The baht will continue to weaken in the second half as the economy remains very weak and fragile," Pimonwan Mahujchariyawong, an economist at Kasikorn Research Co in Bangkok, said by phone. "The expected rise in the U.S. interest rates will also put more pressure on the currency."

The baht is Asia's worst performer since the end of March, having weakened 3.7 per cent to 33.777 a dollar as of 9.56am in Bangkok, the most since the three months ended December 2013. The currency sank to a 2009-low of 33.96 on June 5. It rose 0.1 per cent on Tuesday.

Kasikorn Research predicts the baht may weaken to as low as 34.2 a dollar in the second half.

Thailand's economy expanded at the slowest pace in three years in 2014 and has struggled to recover amid falling exports and deflation. The Bank of Thailand unexpectedly cut its benchmark interest rate for a second straight meeting in April.

Industrial production probably fell for a third month in May, dropping 5 per cent, according to a Bloomberg survey before official figures due at 11am local time. The nation may report a current-account surplus of US$1.3 billion for May, a separate survey showed before central bank data due 2.30pm.

The yield of the bonds maturing December 2025 has jumped 27 basis points to 2.97 per cent this quarter, data compiled by Bloomberg show. That's the biggest increase since the period ended March 2012. The yield has climbed 22 basis points in June.

BLOOMBERG