BOT calls for calm over valuation loss on foreign reserves

[snoop1130]

BOT calls for calm over valuation loss on foreign reserves

By The Nation

 

The Bank of Thailand (BOT) on Monday said there was no need for alarm over a news report concerning its foreign reserves, explaining that that the valuation loss that had been made was the natural result of its responsibility for currency stability during a period of baht appreciation.

 

In response to news on social media involving the central bank’s loss, BOT assistant governor Chantavarn Sucharitakul denied that it had engaged in currency speculation. However, the BOT had bought foreign currency in order to prevent the baht appreciating too quickly, she said.

 

The increase in foreign reserves followed an influx of foreign capital as a result of several consecutive years of current-account surpluses and foreign direct investment, she said.

 

When the baht appreciates, a valuation loss occurs in regard to the country’s foreign reserves, whereas there is there is a valuation gain when the baht weakens, the assistant governor explained.

 

When the economy improves and the currency tends to strengthen, the central bank usually registers a valuation loss, but if the economy worsens and the baht depreciates, it normally records a valuation gain, she said.

 

At the end of last year, the BOT had about US$240 billion (Bt7.64 trillion) in foreign reserves. 

 

If the Thai currency appreciated by Bt1 against the US dollar, the BOT would have an instant valuation loss of Bt240 billion on such a level of reserves. 

 

On the other hand, if the baht depreciated by Bt1, the central bank would make an immediate valuation gain of Bt240 billion, Chantavarn said.

 

She was also at pains to explain that the foreign reserves were still in the form of foreign currency, which was something that did not deteriorate, unlike like agricultural products or commodities as the social-media reporting had compared them to.

 

Source: http://www.nationmultimedia.com/detail/Economy/30344802

 

-- © Copyright The Nation 2018-5-7

[johng]

Totally over my head....boing

[Kinnock]

9 minutes ago, johng said:

Totally over my head....boing

Yes - me too.

 

Any financial types out there who can tell us if we should be worried?

 

Do we need to withdraw all our money and pop into Aurora in Big C to buy gold?  (Any of us with TGF's will be used to this routine).

[saakura]

Makes perfect sense and nothing to worry about, as far as the valuation loss on foreign exchange reserves. 

[Chang_paarp]

It is not currency manipulation. 

 

Nothing to see here.

[Chelseafan]

I notice that the Baht gained 2% against the pound this week coming in at 42.97, it's since lost a little ground and currently pegged at 43.14. I am at a loss as to why the baht is so strong against the major currencies. Perhaps someone can enlighten us ?

 

[smedly]

yes it's all on the up and up straight and narrow - we declare everything very honestly as everyone knows 

 

yes that is a ball bouncing on a head - see we always tell truth

 

 

Please don't look there nothing to see, these are the real accounts that we show you....honest 

 

It's a bit like farang come here and maxing out 20 credit cards …………………. I vely lich man happy happy ring bell

 

ooooops

[smedly]

9 hours ago, Chelseafan said:

I notice that the Baht gained 2% against the pound this week coming in at 42.97, it's since lost a little ground and currently pegged at 43.14. I am at a loss as to why the baht is so strong against the major currencies. Perhaps someone can enlighten us ?

 

actually sterling dropped 

 

just saying

[cornishcarlos]

10 hours ago, snoop1130 said:

At the end of last year, the BOT had about US$240 billion (Bt7.64 trillion) in foreign reserves. 

 

If the Thai currency appreciated by Bt1 against the US dollar, the BOT would have an instant valuation loss of Bt240 billion on such a level of reserves. 

 

On the other hand, if the baht depreciated by Bt1, the central bank would make an immediate valuation gain of Bt240 billion, Chantavarn said.

 

So if the baht appreciates Bt1 against the USD, they lose all their foreign reserves !!!

That sucks 

[smedly]

28 minutes ago, cornishcarlos said:

 

So if the baht appreciates Bt1 against the USD, they lose all their foreign reserves !!!

That sucks 

well probably not that simple but the fact it is getting a mention would raises an alarm, I think maybe more to come

 

Can't remember the exact report or were it was from when someone got a decimal point in the wrong place - don't think it was Thailand but it was a huge sum of money involved

 

The question is - do countries cook the books ? well generally no with the very large economies - Thailand is not one of them but Thailand is a pillar of honesty so it must be ok......right ?

[worgeordie]

They are only loses on paper,a loss would only be made if they actually 

sold any of  the foreign reserves,currency  rates are liquid,so they could 

make several gains ,loses in a day.

regards worgeordie

[Krataiboy]

She was also at pains to explain that the foreign reserves were still in the form of foreign currency, which was something that did not deteriorate

 

Really? My foreign currency reserves, in British pounds, have dropped alarmingly over the last couple of years. 

[toofarnorth]

4 hours ago, smedly said:

well probably not that simple but the fact it is getting a mention would raises an alarm, I think maybe more to come

 

Can't remember the exact report or were it was from when someone got a decimal point in the wrong place - don't think it was Thailand but it was a huge sum of money involved

 

The question is - do countries cook the books ? well generally no with the very large economies - Thailand is not one of them but Thailand is a pillar of honesty so it must be ok......right ?

Yes smedly , when I read the BOT says no need to worry  , I don't but it does get my attention.

[Ulic]

No losses or gains in USD, just paper losses or gains in Thai Baht. Nothing to see. Move along.

[Bob12345]

7 hours ago, cornishcarlos said:

 

So if the baht appreciates Bt1 against the USD, they lose all their foreign reserves !!!

That sucks 

No, you are comparing the wrong numbers.

They have 240 billion USD in foreign reserves, and when the baht appreciates 1 baht against the USD they lose 240 billion baht (not 240 billion dollar)

 

The whole report makes perfect sense by the way, nothing to worry about.

Edited May 8, 2018 by Bob12345

[Telly]

Beggar thy neighbor policy. 

All the major countries following the US in paper money printing,  and pushing the value of their own currency down to appear more value add. 

the Thais can't follow, you need a lot of boffins  to do the arimethics. 

It's not the baht that is strong,  it's the others pushing down their currency value. 

[RobFord]

2 hours ago, Krataiboy said:

She was also at pains to explain that the foreign reserves were still in the form of foreign currency, which was something that did not deteriorate

 

Really? My foreign currency reserves, in British pounds, have dropped alarmingly over the last couple of years. 

 

Once Brexit is complete you will be welcome to the Canadian, Australian and New Zealand basket of currencies.

 

How to survive as a small fish in a big pond? Keep the value of your currency down. 

[Bob12345]

20 hours ago, Chelseafan said:

I notice that the Baht gained 2% against the pound this week coming in at 42.97, it's since lost a little ground and currently pegged at 43.14. I am at a loss as to why the baht is so strong against the major currencies. Perhaps someone can enlighten us ?

 

The answer is in the article:

 

The increase in foreign reserves followed an influx of foreign capital as a result of several consecutive years of current-account surpluses and foreign direct investment, she said.

 

Appearently there is strong demand for the baht because foreigners like to buy more Thai products than Thais like to buy foreign products (current account surplus) and foreigner like to invest more money in Thailand than Thais like ot invest abroad (surplus of foreign direct investments).

 

p.s. the pound/baht value is not pegged at 43.13 as that would imply the exchange rate is fixed.

[Dap]

I get very uncomfortable when told ... "There's nothing to worry about". 

Edited May 8, 2018 by Dap

[simoh1490]

Just to point out that whilst the Foreign Currency Reserves are denominated and accounted for in USD they are actually held in 24 different currencies plus gold, only about 60% are held in actual USD.