Thailand's Baht Slumps Most in 3 Years: World's Biggest Mover By Jake Lee and Yumi Teso
Dec. 19 (Bloomberg) -- The Thai baht dropped by the most in three years after regulators yesterday required banks to lock up 30 percent of new foreign currency deposits for a year to curb speculation. The baht almost doubled a 0.8 percent slide yesterday as central bank Governor Tarisa Watanagase said she was ``confident'' the measures will reduce inflows. The currency had surged 16 percent this year before yesterday, Asia-Pacific's best performer, as overseas investors bought the nation's stocks. ``This could spook the markets and capital may take flight,'' said Claudio Piron, head of Asian currency research at JPMorgan Chase Bank in Singapore. ``The initial reaction from investors is they're fairly negative. The baht could drop further.'' The baht lost 1.5 percent, the biggest fluctuation of any currency today, to 36.07 against the dollar as of 8:06 a.m. in Bangkok. It last fell more on Sept. 14, 2003. It may drop to 36.70 this month, said Piron. Starting today, overseas investors buying baht will only be able to invest 70 percent of what they transfer, and only recoup all of their funds if they keep the money in Thailand for more than a year. Those who withdraw the reserved amount in less than a year will be penalized 33 percent of that 30 percent portion. Tax on Trades ``It's basically as if they're putting a tax on any trades less than a year,'' said Magnus Prim, a senior foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. ``It's going to stop any buying pressure and with the stock market likely to be hit, then we could see the baht falling some more.'' Thailand's SET Index yesterday fell 0.8 percent to close at 730.55, before the central bank announcement. The stock market re-opens at 10 a.m. Overseas investors sold $20 million of Thai stocks Dec. 18, a seventh day of net sales. Yesterday's measures come after the baht appreciated to the strongest in nine years, even though the central bank earlier this month introduced steps to limit gains. The monetary authority on Dec. 4 asked companies and commercial lenders not to sell baht short- term debt securities to overseas investors. ``We will allow some time to evaluate whether this measure effectively reduces short-term inflows, and if not we are ready to introduce new ones,'' Tarisa said yesterday. The world's biggest movers are based on changes in price or yield and are screened for the size of the market and amount of daily trading. To contact the reporter on this story: Jake Lee in Hong Kong at [EMAIL PROTECTED] .
