Stronger baht ‘will hurt exporters and farmers’

By Wichit Chaitrong 
The Nation 

 

 

MOST EXPORTERS are worried about the baht appreciating against the US dollar, fearing it will hit exports and farm incomes amid the slowing of both local and global economies.
 

“A stronger baht will hurt our rice price competitiveness amid weaker currencies in the region, such as India,” Charoen Laothammatas, president of Thai Rice Exporters Association told The Nation yesterday. This will then be passed on to the price of paddy rice, thus adversely affecting farmers, he warned. 

 

Asked whether rice exporters will discuss the issue with the Bank of Thailand (BOT), Charoen said exporters have raised this issue with the central bank many times, but the baht remains stronger compared to other competitors’ currencies, such as India’s rupee and China’s yuan. 

 

The association predicts this year’s rice experts to be around 10 million tonnes, less than the 11 million tonnes forecast in 2018. According to the BOT, the baht stood at 32.205 against the US dollar yesterday, the year’s second day of trading, up from 32.417 to the greenback on December 28 – the last trading day of 2018. 

 

Weakening dollar

The baht rose to 32.032 per dollar in the spot market at about 2pm yesterday, as the yen rose sharply to 107.08 per dollar, said Kobsidthi Silpachai, head of capital markets research at Kasikornbank. 

 

“It was risk off-mode, selling the dollar against safe havens and low yielding currencies like the Japanese yen and Thai baht,” he said. Since yesterday was a Japanese holiday some people suspected that algorithms were behind the US selling, he noted.

 

One factor causing the dollar to weaken is the partial US government shutdown resulting from a political gridlock in Washington, where President Donald Trump and the Democrats, who hold a majority in the lower house, failed to strike a deal, he said. The baht was also mostly flat in trading against the US dollar in January and December last year, but was highly volatile in between. It may be subject to volatile swings in 2019 compared to the Indian rupee, which was down about 9 per cent against the dollar last year, he said. 

 

The Indian rupee’s weakness is likely to continue this year as the subcontinent is expected to run a current account deficit at 2.6 per cent of gross domestic product, compared with Thailand’s estimated current account surplus of 6.9 per cent, he said. Currencies of emerging markets facing current account deficits will also weaken against the dollar, he said.

 

However, he added, that since the US dollar/baht trade was very thin over the past few days, it did not truly reflect demand and supply in the market. Currency trading next week should provide a clearer picture as buyers and sellers enter the market again.

 

Also, the upcoming general election could produce split houses, with politicians controlling the Lower House, while the Senate will be controlled by the military. Hence, the next government may find it difficult to function, much like the situation in Washington, and that could weaken the baht, Kobsidthi added. 

 

Tada Phutthitada, president of the Thai Bond Market Association, said capital inflow into the bond market is low. Over the past few weeks daily inflow has been less than Bt1 billion compared to between Bt2 billion and Bt3 billion daily previously, he said. 

 

This suggests that the baht has not been strengthened by foreign capital inflows, but rather by a weakening dollar, he said. 

 

Meanwhile, investors are unsure whether the US Federal Reserve will continue increasing key policy rates as expected earlier. That, combined with Trump’s threat to fire the Federal Reserve chairman, could weaken the dollar further, Tada said. 

 

Separately, Amornthep Chawla, head of the research office at CIMB Bank, said exporters will face two key challenges – the impact of the US-China trade war and a stronger baht. There is a high possibility that exports could turn negative in the first quarter of 2019, partly due to a slowdown in global economy and also last year’s high base of exports, he warned. 

 

Source: http://www.nationmultimedia.com/detail/business/30361586

 

-- © Copyright The Nation 2019-01-04

Free stuff is never free...someone always pays!

Yea but now maybe they can afford another submarine and send more of their siblings to study abroad.

America is so far in debt it is inevitable that their continued battle with china will keep their dollar down, the floating of the RMB, will balance other currencies but I think china will keep spending the US dollars they have in the bank,

Geeeez... Canadian dollar under 23bht, Aussie is at 21.72 and the New Zeland buck is in the 20's

 

getting almost impossible to stay here with the baht this strong. I really hope the bubble bursts soon!

tourism is also an export since it involves foreign currency and is being hugely impacted by the strong baht

 

a strong baht benefits only one group of people in Thailand - the rich, who want to invest in business and property overseas 

5 minutes ago, LazySlipper said:

Geeeez... Canadian dollar under 23bht, Aussie is at 21.72 and the New Zeland buck is in the 20's

 

getting almost impossible to stay here with the baht this strong. I really hope the bubble bursts soon!

Correct, many incorrectly blame Brexit for the current sterling/baht exchange rate, it only accounts for about 5% of the current 2 year 25% drop

The self-fulfilling prophecy "teflon economy" is nothing but a grandiose delusion. Just wait. The higher it climb, the higher it fall.

5 minutes ago, RotBenz8888 said:

The self-fulfilling prophecy "teflon economy" is nothing but a grandiose delusion. Just wait. The higher it climb, the higher it fall. 

Well I must admit you are free to have this option. But what do you use of data to explain this. ????

Thailand is one of those few countries that doesn't print money by the truckloads to finance an unsustainable way of life, hence its strong currency.

 

It is in a position similar to that of Switzerland, with the difference that the Swiss central bank is hell bent on destroying its currency in order to keep it from appreciating (it would be interesting to see their balance sheet with the Apple stock tanking...which they bought hands over fists at maximum price).

 

Thailand (and us) is victim of its prudence and financial wisdom...who would have guessed?

 

38 minutes ago, leeneeds said:

America is so far in debt it is inevitable that their continued battle with china will keep their dollar down, the floating of the RMB, will balance other currencies but I think china will keep spending the US dollars they have in the bank,

Do you realize that 17 trillion dollars of that debt are owed to the American people? Paying off China would basically have no effect on the world economy. 

  If the U.S. paid off its debt there would be no moreU.S. Treasury bonds in the world. ... The U.S.borrows money by selling bonds. So the end of debt would mean the end of Treasury bonds. But the U.S.has been issuing bonds for so long, and the bonds are seen as so safe, that much of the world has come to depend on them.

39 minutes ago, smedly said:

Correct, many incorrectly blame Brexit for the current sterling/baht exchange rate, it only accounts for about 5% of the current 2 year 25% drop

I do feel the same on the Danish Krone. DKK. The last 5 years we has lost form 5.9 to 4.88 to the baht.????

 

Maybe it dont look at much, but with a big pension we get in Denmark is this about 20000Baht less in the bank every month

2 minutes ago, Brunolem said:

Thailand is one of those few countries that doesn't print money by the truckloads to finance an unsustainable way of life, hence its strong currency.

Not being able to export any of it's agricultural products might become a bit of a problem.

There's only so much storage space for your expensive rice (et al) that nobody will buy.

53 minutes ago, smedly said:

tourism is also an export since it involves foreign currency and is being hugely impacted by the strong baht

 

a strong baht benefits only one group of people in Thailand - the rich, who want to invest in business and property overseas 

Don't forget the world bank has already warned BOT to stop propping the baht. Buuuttt.... it is good for hiso's investesting their brown money abroad, buying property abroad etc..,

18 minutes ago, carstenp said:

Well I must admit you are free to have this option. But what do you use of data to explain this. ????

Oh,yes the data. Everything looks great, if you look at that very reliable data coming out. Like the ever growing tourist numbers and yet empty airports.

 

1 minute ago, RotBenz8888 said:

Oh,yes the data. Everything looks great, if you look at that very reliable data coming out. Like the ever growing tourist numbers and yet empty airports.

 

I do agree on the tourist numbers, but the economy in Thailand is not so bad as you want to state. ????

1 hour ago, smedly said:

tourism is also an export since it involves foreign currency and is being hugely impacted by the strong baht

 

a strong baht benefits only one group of people in Thailand - the rich, who want to invest in business and property overseas 

Correct in what you say,sometimes it makes you think if the strong baht is being manipulated 

2 minutes ago, carstenp said:

I do agree on the tourist numbers, but the economy in Thailand is not so bad as you want to state. ????

Hey Carsten, don't ruin my morning. With your positive attitude.

While slightly off the specific topic, one wonders if underdeveloped SEA countries like Thailand will benefit from the disentangling of the Chinese/US economies. 

 

All the production has to go somewhere. And, there have already been reports of Chinese firms opening operations (slyly) in Northern Vietnam to escape the trade tariffs and other measures. 

 

Anyway, Thailand is a smallfry in the global economy. If you earn in Thailand, earn alot. If you earn abroad, make sure it's not fixed. 

A$ reaching 10 year lows. Strong baht stops a lot of expats bringing in extra money, just basic requirements. Stopped me for sure. Probably a good thing. The minimalistic life and the urge to give it away buying crap we don’t need seems healthy.

Rich Thais are certainly buying up abroad. I should say “ mega rich”. It’s more accurate. 

Supermarket shelves in the West used to be filled with Thai rice, at the end a little bit from other countries...that reversed years ago, what do they expect, its economics

1 hour ago, BritManToo said:

The people blaming Brexit are the 'remoaners' and they have an agenda that won't be stopped by pointing out the truth.

I wonder who the Canadians blame? they've lost more than the Brits over the past two years.

exactly, I have made several attempts to explain the simple concept of currency exchange but they just don't get it, comparison of two currencies will not answer the simple question - Did one of them go up or did the other one go down, you need a broader scope of inputs to accurately answer that question.

 

IMO without the influence of Brexit sterling should be around 43 right now down from 45 a few weeks ago, the baht is in control of greedy people and if it continues could come crashing down

1 hour ago, carstenp said:

I do feel the same on the Danish Krone. DKK. The last 5 years we has lost form 5.9 to 4.88 to the baht.????

 

Maybe it dont look at much, but with a big pension we get in Denmark is this about 20000Baht less in the bank every month

At least you're still getting your big pension. 

17 minutes ago, ZeVonderBearz said:

At least you're still getting your big pension.

I do. But everything is on hold here in Thailand. I dont invest in anything. No new motorbike, house building only few holidays with the family. I will not bring more money to Thailand right now. Like many, I do believe Thailand has become very expensive, even with my income. I feel I dont get value for my money anymore. Before I could accept to live in a 3 world country and the quality there is here, but right now, I feel like, I pay to much for a lower quality of life here. Many things are even more expensive here, than my home country  

2 hours ago, Longcut said:

Do you realize that 17 trillion dollars of that debt are owed to the American people? Paying off China would basically have no effect on the world economy. 

  If the U.S. paid off its debt there would be no moreU.S. Treasury bonds in the world. ... The U.S.borrows money by selling bonds. So the end of debt would mean the end of Treasury bonds. But the U.S.has been issuing bonds for so long, and the bonds are seen as so safe, that much of the world has come to depend on them.

Besides that, that "debt" is U.S. Treasury Bonds, the most desired financial investment outside of Japanese treasury bonds; Japan's "national debt" is 200+% of GDP, while America's is about 80%. Those treasury bonds represent national <b>savings</b>. The total is misnamed "debt" because of accounting practices -- in never has to be repaid and never is. In fact the five times there was a serious reduction of the "national debt" it caused a financial. Only the last one, caused by Clinton's budget surplus, was not a major depression.

ETA The exchange rate shown by SCB today was ฿31.84 and Bloomberg reports there was a large spike in the Japanese Yen against the US Dollar.

17 hours ago, mok199 said:

Free stuff is never free...someone always pays!

Huh?

2 hours ago, DPKANKAN said:

Don't forget the world bank has already warned BOT to stop propping the baht.

If I am not mistaken Thailand refuted that they were propping their baht.

BTW when did they warn the BOT? I seem to remember something like that... but can't remember when.

1 hour ago, Curmudgeon1 said:

Huh?

The cost of corruption ,road carnage and lawlessness with police who just p/u a paycheck every week,( to name 3) ,endless bags of free meds for everyone,submarines ,helicopters and new war ships  close to 1 bill on pattyas beach( which is the 3rd attempt) Thailand has over 1000 generals all collecting a salary over 250,000 us/yr, over development ,education corruption,lawless tour groups destroying the environment making millions doing so, the budget tours ,who spend nothing in Thailand leaving behind only their garbage ... this country is spiraling out of control with the open cheque ,jump on the gravy train policy ...To many ,Thailand is a pie ,these disrespectful people felt ''entitled a piece'',this entitlement has destroyed this once great Kingdom...the pie is just a crust now.this country is eating itself alive from the inside out.. But we have lots of new malls everywhere ..so thiers that..

5 hours ago, webfact said:

MOST EXPORTERS are worried about the baht appreciating against the US dollar,

Don't quite understand the concern when all our competing countries also appreciated against US dollar. Moreover the appreciating baht lower costs of imported materials and fuel. Thailand is not competitive because of a whole array of logistical and productivity problems. Blaming the currency is just a convenient excuse. 

4 hours ago, LazySlipper said:

Geeeez... Canadian dollar under 23bht, Aussie is at 21.72 and the New Zeland buck is in the 20's

 

getting almost impossible to stay here with the baht this strong. I really hope the bubble bursts soon!

Probably a good time for condo owners here to sell up and making a killing in currency exchange and then go home