Thai Baht Drops After Military Imposes Martial Law to Quell Political Unrest
- The Thai Baht dropped as Thailand's army declared martial law following six months of anti-government protests and political uncertainty
- A further deteriorating situation in Thailand could see risk aversion from investors to shift out of Emerging Markets
The Thai Baht slid over 0.5% against the US Dollar as Thailand’s army imposed martial law nationwide. Following months of political turmoil, Prime Minister Yingluck Shinawatra was dismissed on May 7 after a court found her guilty of abuse of power. In a statement, the Thai Army Chief urged the end of protests, asserting that the move was not a coup and was only intended to maintain order.
A proposed amnesty bill in October sparked months of unrest among anti-government protestors. The instability hit the economy, sending Thai production and tourism to a heavy 2.1 percent decline in Thailand’s GDP from the previous quarter and a 0.6% decline compared to a year ago. In a surprise move, the Bank of Thailand responded in November of last year by cutting rates by 25bps and again in March to prop up the stagnating economy.
This political crisis in Thailand is the latest flare up in in a notable spread of turmoil amongst the risk-sensitive emerging market asset class. The Argentine currency crisis earlier this year and the ongoing troubles in Ukraine have elevated the sense of risk in the global economy. Further deterioration of the political situation in Thailand could leverage fear as well as the appetite for safe havens plays.
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USD/THB 11/19/13 – 5/19/14
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