Bot Announces Loss Of Baht 174 Billion [$5billion]

[topfield]

Yesterday the Assistant Governor of the Bank of Thailand announced at a press conference a loss in the value of the official reserves of Baht 174 billion ( saen tjet see pan laan. ).

This evening Sontee Limtongkun raised this issue on ASTV and Channel 11 to launch a ferocious attack on the Thai Finance Minister and the Governor of the Bank of Thailand.

But was K.Sontee being fair ? Due to the recent strength of the baht the value in baht terms of the foreign currency held by the BOT had dropped dramatically. Each dollar bought last year for 41 baht for example is now worth only Baht 35.75

Should National banks be blamed if their currency strengthens ??? Surely not.

[britmaveric]

Yes - best interest for a weak currency, so obviously they aren't doing their jobs.

[alexth]

Anyone here didn't see it coming?

[seagull]

Yesterday the Assistant Governor of the Bank of Thailand announced at a press conference a loss in the value of the official reserves of Baht 174 billion ( saen tjet see pan laan. ).

This evening Sontee Limtongkun raised this issue on ASTV and Channel 11 to launch a ferocious attack on the Thai Finance Minister and the Governor of the Bank of Thailand.

But was K.Sontee being fair ? Due to the recent strength of the baht the value in baht terms of the foreign currency held by the BOT had dropped dramatically. Each dollar bought last year for 41 baht for example is now worth only Baht 35.75

Should National banks be blamed if their currency strengthens ??? Surely not.

If instead of a loss of bht 174 billion, BOT makes a profit of bht 174 billion, then the BOT's governor would get the credits, right. And perhaps big fat bonus as well. But since it is a loss of such a massive amount, and I believe it is in 2 straight years, why wouldn't they be blamed for it. Oh I see, make monies, it is my credit, lose money and it ain't my fault. These are the countries reserve. As a matter of fact, they ought to be blind folded and be let to the quillotine.

[sfokevin]

And BOT is calculating their loss on their own Onshore rate!... Take that loss and double it Offshore

[Naam]

This evening Sontee Limtongkun raised this issue on ASTV and Channel 11 to launch a ferocious attack on the Thai Finance Minister and the Governor of the Bank of Thailand.

But was K.Sontee being fair ?

he wasn't fair but just plain dumb. as you mentioned correctly "reserves" are held in foreign currency and not THB. no central bank holds reserves in domestic currency! fluctuations of reserves any central bank holds result in book losses or book gains.

perhaps Khun Sontee should lend his crystal ball to the BOT as a guide in which currencies to hold reserves in future.

[PeaceBlondie]

Let me play the dummy (easy role ) here: if the BOT in fact suffered a loss of 174 billion baht in its currency reserves (held in other currencies, such as dollars), is it because they kept selling their dollar reserves in order to weaken the value of the baht? Hasn't that operation failed miserably? E.g., I've been getting 35.75 baht per dollar, down at the ATM's in Thailand, since early December, and I just got 35.61 today, as well. I hate getting so much less than 40:1, but 35.61 surely beats 33.20. When I look at the daily fluctation on Yahoo, the spikes go up and down. Is that because every time the rate gets below 35 or even 34, the BOT floods the market with dollars they bought at higher rates?

[simon43]

I wonder what is the total amount of reserves that are held? 174 billion baht is a lot of money already....

Simon

[junkofdavid2]

Let me play the dummy (easy role ) here: if the BOT in fact suffered a loss of 174 billion baht in its currency reserves (held in other currencies, such as dollars), is it because they kept selling their dollar reserves in order to weaken the value of the baht? Hasn't that operation failed miserably? E.g., I've been getting 35.75 baht per dollar, down at the ATM's in Thailand, since early December, and I just got 35.61 today, as well. I hate getting so much less than 40:1, but 35.61 surely beats 33.20. When I look at the daily fluctation on Yahoo, the spikes go up and down. Is that because every time the rate gets below 35 or even 34, the BOT floods the market with dollars they bought at higher rates?

I'm confused... isn't it the other way around? The BOT wants to weaken the baht, so they sell Baht and buy dollars, right?

Correct me if I'm wrong....

[loong]

Let me play the dummy (easy role ) here: if the BOT in fact suffered a loss of 174 billion baht in its currency reserves (held in other currencies, such as dollars), is it because they kept selling their dollar reserves in order to weaken the value of the baht? Hasn't that operation failed miserably? E.g., I've been getting 35.75 baht per dollar, down at the ATM's in Thailand, since early December, and I just got 35.61 today, as well. I hate getting so much less than 40:1, but 35.61 surely beats 33.20. When I look at the daily fluctation on Yahoo, the spikes go up and down. Is that because every time the rate gets below 35 or even 34, the BOT floods the market with dollars they bought at higher rates?

I'm confused... isn't it the other way around? The BOT wants to weaken the baht, so they sell Baht and buy dollars, right?

Correct me if I'm wrong....

No you're not wrong. Peaceblondie has it the wrong way round.

If they lost 174 billion baht and assuming the post is right where they state buying $ at 41 and now 35.75 , that's a loss of 5.25 Bt per $. Divide 174 Billion by 5.25 would mean that Thailand holds over 33 billion $ foreign currency. I actually thought it was nearer 50 billion, but anyway it seems very high for a supposedly poor country.

Edited February 24, 2007 by loong

[loong]

http://www.bot.or.th/BOTHomepage/search/Cl...n%20reserves%20

Link to foreign currency reserves as at 31 Jan

[topfield]

This evening Sontee Limtongkun raised this issue on ASTV and Channel 11 to launch a ferocious attack on the Thai Finance Minister and the Governor of the Bank of Thailand.

But was K.Sontee being fair ?

he wasn't fair but just plain dumb. as you mentioned correctly "reserves" are held in foreign currency and not THB. no central bank holds reserves in domestic currency! fluctuations of reserves any central bank holds result in book losses or book gains.

perhaps Khun Sontee should lend his crystal ball to the BOT as a guide in which currencies to hold reserves in future.

DR NAAM I agree with you 100 % . What you say is 100 percent correct in my view.

Basically where the baht strengthens the BOT'S losses will be higher. Where the baht weakens the losses will be less. ...Should the baht weaken substantially then the so called losses will turn into profits in baht terms. .

So if Sontee wants to see a fat profit on the BOT's reserves all that's needed is for the Thai economy to nosedive and go into free fall with bombs and unrest in the streets. And that's surely NOT what he wants.

[thaihome]

The loss is a based on the fact that the BOT's books are in THB and therefore any dollar holdings (and there is a lot) are calculated into Baht based on currrent exchanges rates. With the weakening dollar, there is less Baht.

TH

[OlRedEyes]

/deleted

Edited February 26, 2007 by OlRedEyes

[bendix]

Again, we have the OP opining wisely on subjects of which he has only the most base of comprehensions.

According to the Economist, the BOT held over US$63billion in reserves in December 2006. These are - by definition - foreign currency holdings. It stands to reason that when the baht rises in value (or those held currencies weaken) on paper the holdings are worth less. It is a paper loss, that's all. The US$63billion remains in place.

True to form, there is no timeline in the OP's shock horror posting. That is kind of relevant, I think. If only $5billion has been lost on the value, that is a pretty good performance given that that it amounts to a 8-9% loss only, at a time when the baht has appreciated against the dollar at a substantially higher rate. In other words, the BOT has done a pretty good job at maintaining the country's reserves.

Of course, why let good facts get in the way of sensationalist nonsense?

[pete_r]

Yesterday the Assistant Governor of the Bank of Thailand announced at a press conference a loss in the value of the official reserves of Baht 174 billion ( saen tjet see pan laan. ).

There is something I don't understand (I'm no expert!!!).

On 17 Feb 2006, The BOT declares 2099.9 Bns Bahts for its international reserve (53.5 Bns USD, rate 39.25 BHT/USD)

On 16 Feb 2007, The BOT declares 2407.1 Bns Bahts for its international reserve (67.5 Bns USD, rate 35.66 BHT/USD)

Year on year, that looks like an increase of 307.2 Bns Bahts, not a decrease?

The figures are from the BOT website:

Economic condition 17.02.2006:

http://www.bot.or.th/BOThomepage/DataBank/...006/E240206.htm

Economic condition 16.02.2007:

http://www.bot.or.th/BOThomepage/DataBank/...007/E230207.pdf

[topfield]

Yesterday the Assistant Governor of the Bank of Thailand announced at a press conference a loss in the value of the official reserves of Baht 174 billion ( saen tjet see pan laan. ).

There is something I don't understand (I'm no expert!!!).

On 17 Feb 2006, The BOT declares 2099.9 Bns Bahts for its international reserve (53.5 Bns USD, rate 39.25 BHT/USD)

On 16 Feb 2007, The BOT declares 2407.1 Bns Bahts for its international reserve (67.5 Bns USD, rate 35.66 BHT/USD)

Year on year, that looks like an increase of 307.2 Bns Bahts, not a decrease?

The figures are from the BOT website:

Economic condition 17.02.2006:

http://www.bot.or.th/BOThomepage/DataBank/...006/E240206.htm

Economic condition 16.02.2007:

http://www.bot.or.th/BOThomepage/DataBank/...007/E230207.pdf

Take the Feb 2006 figure and you see 53.5 billion dollars of reserves. Those reserves were worth 2099.9 billion baht . Well they are now worth far less as each dollar is worth only 36.6 baht now. When the figues came out each dollar was worth far more 39.25 each. Understand the principle ?

As for your point that the reserves are far higher now in baht terms than they were, this is because there are far more dollars in the reserves now than they were then...but each dollar is worth far less in baht.

What it all means is that when a currency strengthens often as a result of a stronger economy the value of its reserves decreases. When a country has problems and the local currency slides ,the value of its reserves in local currency increases. Therefore it was in my opinion grossly unfair for Sontee of ASTV who I otherwise admire and respect to criticise the BOT governor. After all look at what Gordon Brown did...he sold almost the entire UK gold reserves at around US$250 an ounce losing billions and billions for the UK as the price has tripled since his stupid short sighted decision. And yes, he should have known better . Chancellor Barber in the 60's handed over to the Americans three quarters of then massive UK gold reserves for $35 AN OUNCE !!! [The value of the gold is now US$685 an ounce ]

Edited February 26, 2007 by topfield