The Baht Goes Crazy

[topfield]

FOREIGN EXCHANGE

BOT urges dealers to buy dollars

Baht weakens amid volatile trading

The central bank urged dealers at banks to "adjust" their foreign-exchange positions, resulting in banks buying up US dollars and causing the baht to weaken against the greenback in afternoon trade yesterday, falling to 35.05 against the greenback from Thursday's close of 34.63/34.67.

................................................................................

.......

Headlines from this mornings Nation newspaper. No similar report in Bangkok Post today.

Rate given there :

EXCH RATES

Baht/$ 34.90/10

Bid/Ask

Any views on what's going on as above contradicts many earlier postings ?

[Norrad]

I've been watching it for the last few days, as I am planning a trip home for a while, and it is going crazy. Over the last few days, it has gone from nearly 31.50 to 35 and back down. Sitting at 32.065 now. I hope it stays there or gets stronger. My Baht will go further back home.

You can check it out for yourselves at: http://finance.yahoo.com/currency/convert?...;amt=1&t=5d

[sfokevin]

What makes this really crazy is Dr Tarisa's comment on these developments - she was quoted in the same article...

"Bank of Thailand (BOT) Governor Tarisa Watanagase said she met with TBA chairman Apisak Tantivorawong to discuss the baht but added that she did not know why there was demand from banks to buy dollars yesterday"

These people should go back to their old jobs as runway designers...

Edited March 24, 2007 by sfokevin

[justyn]

The exchange rates reported on Yahoo are misleading. For example, 32 is what someone would have to pay for baht outside of Thailand. Inside Thailand, you can get baht for 35 (approx). Thus, it is not bouncing up and down from 32 to 35 every day. It just looks that way on the web sites which report the numbers. When the banks are open in Thailand, Yahoo will sometimes pick up 35 as the rate and then when the banks close for the day, Yahoo shows 32.

[chiang mai]

The Baht is also stronger against GBP by just under one Baht since 16 March and I can see no obvious cause for this unless the BOT has resumed its intervention.

[Maestro]

chiang mai, you’ve got that all wrong. The declared purpose of the BOT is to weaken the Baht with its intervention, not to strengthen it.

--

Maestro

[chiang mai]

chiang mai, you’ve got that all wrong. The declared purpose of the BOT is to weaken the Baht with its intervention, not to strengthen it.

--

Maestro

Sorry Maestro, that was what I had intended to write but it was obviously too early in the morning - bathroom run and peek at TV and all that!

[Naam]

The exchange rates reported on Yahoo are misleading. For example, 32 is what someone would have to pay for baht outside of Thailand. Inside Thailand, you can get baht for 35 (approx). Thus, it is not bouncing up and down from 32 to 35 every day. It just looks that way on the web sites which report the numbers. When the banks are open in Thailand, Yahoo will sometimes pick up 35 as the rate and then when the banks close for the day, Yahoo shows 32.

BINGO!

[chiang mai]

FOREIGN EXCHANGE

BOT urges dealers to buy dollars

Baht weakens amid volatile trading

The central bank urged dealers at banks to "adjust" their foreign-exchange positions, resulting in banks buying up US dollars and causing the baht to weaken against the greenback in afternoon trade yesterday, falling to 35.05 against the greenback from Thursday's close of 34.63/34.67.

................................................................................

.......

Headlines from this mornings Nation newspaper. No similar report in Bangkok Post today.

Rate given there :

EXCH RATES

Baht/$ 34.90/10

Bid/Ask

Any views on what's going on as above contradicts many earlier postings ?

Topfield - as stated earlier I have no idea why the sell order has been issued but presumably this reflects the governments desire to weaken the Baht and to improve the position of exporters. The most recent thing I have read on this subject suggests the BOT believes that market forces will cause the onshore and offshore rates to converge, whatever that quite means I'm not sure!

But my question to you is, given all the press on TV recently regarding onshore and offshore rates how does someone take advantage of the offshore sell rate into say GBP because I don't believe the headline rate is anywhere close to achievable. GBP offshore currently is around 62 whilst the buy rate in practice is around 75 - UK forex dealers taking a much greater margin than their Asian counterparts. If you or anyone else has experience of selling Baht for GBP offshore, I will be interested to hear of it.

[Naam]

"If you or anyone else has experience of selling Baht for GBP offshore, I will be interested to hear of it"

nice try but if a profitable way existed (to change THB vs. any foreign currency) there wouldn't be any difference between offshore and onshore rate as THB liquidity offshore would jump.

[topfield]

"If you or anyone else has experience of selling Baht for GBP offshore, I will be interested to hear of it"

nice try but if a profitable way existed (to change THB vs. any foreign currency) there wouldn't be any difference between offshore and onshore rate as THB liquidity offshore would jump.

Dont think a few suitcases brought into Mustafa's each day stuffed with baht notes would affect overal baht liquidity in Singapore, do you ? It would effect the smuggler's bank balance rather favourably though !

Edited March 25, 2007 by topfield

[lannarebirth]

Speaking of currencies... Do any GBP holders see anything to worry about in the negative divergances in the LT GBP chart?

http://stockcharts.com/h-sc/ui?s=$XBP...&a=79290890

[chiang mai]

Speaking of currencies... Do any GBP holders see anything to worry about in the negative divergances in the LT GBP chart?

http://stockcharts.com/h-sc/ui?s=$XBP...&a=79290890

If I understood it then maybe I would worry about it, but! My understanding is that GBP will fall against the Thai Baht (and other currencies) later this year.

[lannarebirth]

Speaking of currencies... Do any GBP holders see anything to worry about in the negative divergances in the LT GBP chart?

http://stockcharts.com/h-sc/ui?s=$XBP...&a=79290890

If I understood it then maybe I would worry about it, but! My understanding is that GBP will fall against the Thai Baht (and other currencies) later this year.

I don't chart the GBP vs THB, only against the $USD. Nothing is cast in stone and indeed anything at all may happen, including a strong advance by the GBP. I'm only pointing out that this negative divergence exists and last time it did a really nasty correction ensued. Here's a definition of a negative divergence:

http://www.trade10.com/negative_divergence.htm

ttp://stockcharts.com/school/doku.php?id=...tive_divergence

Edited March 25, 2007 by lannarebirth

[chiang mai]

Speaking of currencies... Do any GBP holders see anything to worry about in the negative divergances in the LT GBP chart?

http://stockcharts.com/h-sc/ui?s=$XBP...&a=79290890

If I understood it then maybe I would worry about it, but! My understanding is that GBP will fall against the Thai Baht (and other currencies) later this year.

I don't chart the GBP vs THB, only against the $USD. Nothing is cast in stone and indeed anything at all may happen, including a strong advance by the GBP. I'm only pointing out that this negative divergence exists and last time it did a really nasty correction ensued. Here's a definition of a negative divergence:

http://www.trade10.com/negative_divergence.htm

ttp://stockcharts.com/school/doku.php?id=...tive_divergence

I've checked this my Forex pal and he reckons that GBP will make one more push towards the magical USD 2.0 mark before topping out and predictably weakening - this is in line with market commentary for some time now that has suggested that GBP is overvalued and a correction is due. How that scenario stacks up against the future of the Thai Baht remains unclear and my chum cannot shed light on it since he can't get reliable data feeds right now - his data feeds are suggesting that THB fell 9% today so obviously not trustworthy. Be interested though to read what your take is on the charts.

[soundman]

Haven't been keeping a day to day watch on the fluctuations, however:

I quote all prices for my export poducts in thai baht.

Last monday I had one customer using SWIFT transfer $Aud & he got about 26.3 Baht per dollar.

Today I had the same customer using SWIFT transfer $Aud & he got about 27.7 Baht per dollar.

Thats a fairly large fluctuation over the space of seven days, & with the tens of thousands of dollars involved, my customer was pretty peeved at not waiting a week to combine the first transaction with the second. hindsight!!!!

Cheers,

Soundman.

[bingobongo]

some excerpts that stood out for me were..............

RISKY BUSINESS

Clouds on Thailand's horizon

March 27

"The Bank of Thailand has in recent months spent more than a trillion baht to keep the currency weak. "

"Thailand's instability-driven collapse of domestic demand is also plainly discernible in sliding real investment growth. "

"Moreover, further devaluation of the US dollar could lead to the depreciation rather than appreciation of the Thai baht, as investors are forced to unwind their yen carry trades. That means that in the months ahead both Thai asset prices and the military-led government could tumble in unison. "

http://www.atimes.com/atimes/Southeast_Asia/IC27Ae02.html

[Naam]

"Dont think a few suitcases brought into Mustafa's each day stuffed with baht notes would affect overal baht liquidity in Singapore, do you ? It would effect the smuggler's bank balance rather favourably though !"

carrying a few suticases with physical THB do Singapore is purely hypothetical Topfield. by the way who or what is Mustafa?

[sonicdragon]

by the way who or what is Mustafa?

Mustafa Centre, in the indian section. Home of an (in)famous money changer that made a killing when the Sterling Area was dismantled in the 70's (apparently)

[topfield]

by the way who or what is Mustafa?

Mustafa Centre, in the indian section. Home of an (in)famous money changer that made a killing when the Sterling Area was dismantled in the 70's (apparently)

Now that I did not know. Mustafa Centre is a 24 hour department store now with probably the largest turnover of any store in Singapore and a huge moneychanger section.

Bv the way is there anywhere I can look up that astonishing fact mentioned ?

What I do know is :

1. The '67 war opened up a huge hole in the sterling area system when East Jerusalem ..Jordan then part of the Sterling Area ....came under Israeli dollar area control ! One could cross the street and change pounds into dollars.

2. The infamous Kuwait Gap where sterling was easily exchanged for dollars

Singapore must have been in the Sterling Area as British. Would just love to know what happened there.

[bendix]

Toppy . . . you really do get off on this stuff, don't you?

Do you have any other interests? Try origami. I hear it's very relaxing.

[sonicdragon]

A lot of black market money changers made a killing around that time. I don't have any evidence of Mustafa's involvement - it may be just heresay - I can't even remember who told me.

As for the dismantling of the Sterling Area, in a nutshell (always dangerous, but anyway...) there were 2 main factors: First, dismantling it was a requirement of the UK joining the EEC (as it was then called). The UK held out on this point through the sixties. The second factor was the economic decline of the UK and the associated decline of sterling as the world's reserve currency. Having been almost fatally wounded, economically, by the 2 world wars and then a succession of crises including not least Suez and various israeli conflicts and the costs of withdrawing from the colonies, the end of the bretton woods agreement was the final nail in the coffin for the Area.

I've already posted on a different thread today about pegged exchange rates. They don't work (except in limited circumstances). The Sterling Area was a good example of that. As the UK's economic problems mounted, it became inevitable that the pegs would have to go. unofficial markets in currencies began, and money changers prospered. There were no behemoth hedge funds to jump on board in those days, so the process took longer, but in the end the result was the same.

[cclub75]

Basically, thats' the proof that BOT is runing out... of amunitions. And ideas.

They have politely "suggested" to the thai commercials banks to help... and to stop dumping their USD, and rather buy USD.

This the explaination for friday and monday. But today... we can see that the trend is back. THB is going up. Again.

To sum'up. First the THB surge was due to the uggly farang speculators. Then we learned that thai exporters... the very ones that knight BOT wanted to help, were selling like crazy their USD. And now... the thai banks were doing the same. How ironic...

The thai banks of course followed the order. By doing so, they are taking risks. Like BOT who is pilling USD to its USD reserves... That are loosing value every day...

Meanwhile, there are rumors of a pegged THB. Swiftly denied by the BOT and the Finance Minister. In rather strong words.

So what could be the next step ?

I'm wondering if Doctor Tarisa think about her retirement...

I think the bottom line of this circus is : which factor do you overweight ?

-you believe that the "fundamentals" (economy and politics too) in Thailand are so bad, and are going to worsen, that eventually THB will loose ground.

-or you believe that whatever the thai problems, because the USD is going south anyway within a major global trend, the THB will keep its positions or even continue to go up.

Today, BOT doesn't appear to be willing to make a clear choice. They are only reacting on a day to day basis, just gaining... time.

It's a rather risky game.

Baht Falls as Bank of Thailand Suggests Lenders Sell Currency

By Kevin Lim and Anuchit Nguyen

March 27 (Bloomberg) -- The Thai baht dropped against the dollar as the Bank of Thailand suggested domestic lenders sell the currency after it climbed to a nine-year high.

Deputy Governor Atchana Waiquamdee said today that banks should switch foreign-exchange positions to the level they held on Dec. 31, which proceeded a two-week decline in the baht. The currency has climbed since then, eroding exports that account for about 60 percent of Thailand's gross domestic product.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

[Naam]

"The Sterling Area was a good example of that. As the UK's economic problems mounted, it became inevitable that the pegs would have to go. unofficial markets in currencies began, and money changers prospered. There were no behemoth hedge funds to jump on board in those days, so the process took longer, but in the end the result was the same."

OOPS Dragon! i think you forgot George Soros. in fact it was George and his Quantum fund who gave Sterling the coup de grâce down in summer 1992 and made a killing.

quote:

Soros' Quantum Fund, then and now managed by Stanley Druckenmiller, stepped into this crisis environment to bet against the Italian lire and then the British pound. Indeed, the British position seemed so untenable, Soros "coached" Druckenmiller to leverage an enormous bet of $10 billion. Even as the British government announced a 2% rate hike, Soros kept selling sterling.

By evening of that day, the British were forced to rescind the rate increase and withdraw the pound from the ERM altogether. Sterling immediately plunged relative to the mark, and Soros' hedge fund walked away with more than $1 billion in profits. As the financial writer Adam Smith would later say, "It was the coup of a generation."

p.s. i made a killing too by shorting GBP. not based on speculating but solely to protect my GBP-investment which at that time amounted to more than 25% of my total holdings.

Edited March 27, 2007 by Dr. Naam

[sonicdragon]

"The Sterling Area was a good example of that. As the UK's economic problems mounted, it became inevitable that the pegs would have to go. unofficial markets in currencies began, and money changers prospered. There were no behemoth hedge funds to jump on board in those days, so the process took longer, but in the end the result was the same."

OOPS Dragon! i think you forgot George Soros. in fact it was George and his Quantum fund who gave Sterling the coup de grâce down in summer 1992 and made a killing.

quote:

Soros' Quantum Fund, then and now managed by Stanley Druckenmiller, stepped into this crisis environment to bet against the Italian lire and then the British pound. Indeed, the British position seemed so untenable, Soros "coached" Druckenmiller to leverage an enormous bet of $10 billion. Even as the British government announced a 2% rate hike, Soros kept selling sterling.

By evening of that day, the British were forced to rescind the rate increase and withdraw the pound from the ERM altogether. Sterling immediately plunged relative to the mark, and Soros' hedge fund walked away with more than $1 billion in profits. As the financial writer Adam Smith would later say, "It was the coup of a generation."

p.s. i made a killing too by shorting GBP. not based on speculating but solely to protect my GBP-investment which at that time amounted to more than 25% of my total holdings.

No, I didn't forget. It's just not relevent to the dismantling of the Sterling Area - it happened in 1972.

It does, however, reinforce what I said about pegged exchange rates.

Edited March 27, 2007 by sonicdragon

[roblin]

anyone else get the feeling that someone in power has said "do something about the situation" to BoT and that BoT is just fumbling in the dark afraid of getting fired.

[topfield]

"The Sterling Area was a good example of that. As the UK's economic problems mounted, it became inevitable that the pegs would have to go. unofficial markets in currencies began, and money changers prospered. There were no behemoth hedge funds to jump on board in those days, so the process took longer, but in the end the result was the same."

OOPS Dragon! i think you forgot George Soros. in fact it was George and his Quantum fund who gave Sterling the coup de grâce down in summer 1992 and made a killing.

quote:

Soros' Quantum Fund, then and now managed by Stanley Druckenmiller, stepped into this crisis environment to bet against the Italian lire and then the British pound. Indeed, the British position seemed so untenable, Soros "coached" Druckenmiller to leverage an enormous bet of $10 billion. Even as the British government announced a 2% rate hike, Soros kept selling sterling.

By evening of that day, the British were forced to rescind the rate increase and withdraw the pound from the ERM altogether. Sterling immediately plunged relative to the mark, and Soros' hedge fund walked away with more than $1 billion in profits. As the financial writer Adam Smith would later say, "It was the coup of a generation."

p.s. i made a killing too by shorting GBP. not based on speculating but solely to protect my GBP-investment which at that time amounted to more than 25% of my total holdings.

No, I didn't forget. It's just not relevent to the dismantling of the Sterling Area - it happened in 1972.

It does, however, reinforce what I said about pegged exchange rates.

Correct the Sterling Area about which I have not even thought for 20 years and George Soros are different matters.

My recollection was that it was a wonderful institution . It opened the monetary prison doors for us in the UK where a fifty pound annual allowance was our only escape to monetary and even personal freedom.

We could not afford to visit the Americas nor most of Continental Europe but most of Asia, Africa and Australasia was open to us. Even in Europe the Scandinavian countries were open to us as they were included in the Sterling Area.

Remember in the early 60's the man fined his lwhole ife savings for "arranging" a wedding gift to his daughter in Israel ? By the late 60's the same man could send what he liked to his daughter as long as a East Jerusalem bank was used !!

Since no info forthcoming on Singapore's role in the sterling area first mentioned by sonic I will try to find a book on the history of the Area.

In the meanwhile I paste an interesting article on the area which was considered a part of the British Financial Empire ..something that had not even occured to me at the time !

................................................................................

......................................................................

The dream of Britain as a global power also included the ‘invisible empire’ of the Sterling Area, to which Britain chose to play the banker. This was despite the fact that her reserves of gold and dollars were well known in Whitehall to be far too scanty for this role. By the end of 1947, the American dollar loan had already been largely spent, but the gulf still remained between the cost of Britain’s self-inflicted global commitments and her inadequate earnings from exports. Without another huge dollar handout, Britain would have to give up all her global strategic commitments, as well as her role as the banker to the Sterling Area, and accept that she was now only a second-class power.

................................................................................

.........................................................................

[topfield]

"The Sterling Area was a good example of that. As the UK's economic problems mounted, it became inevitable that the pegs would have to go. unofficial markets in currencies began, and money changers prospered. There were no behemoth hedge funds to jump on board in those days, so the process took longer, but in the end the result was the same."

OOPS Dragon! i think you forgot George Soros. in fact it was George and his Quantum fund who gave Sterling the coup de grâce down in summer 1992 and made a killing.

quote:

Soros' Quantum Fund, then and now managed by Stanley Druckenmiller, stepped into this crisis environment to bet against the Italian lire and then the British pound. Indeed, the British position seemed so untenable, Soros "coached" Druckenmiller to leverage an enormous bet of $10 billion. Even as the British government announced a 2% rate hike, Soros kept selling sterling.

By evening of that day, the British were forced to rescind the rate increase and withdraw the pound from the ERM altogether. Sterling immediately plunged relative to the mark, and Soros' hedge fund walked away with more than $1 billion in profits. As the financial writer Adam Smith would later say, "It was the coup of a generation."

p.s. i made a killing too by shorting GBP. not based on speculating but solely to protect my GBP-investment which at that time amounted to more than 25% of my total holdings.

.................

Dear Dr Naam,

I am sure you will disagree violently but the blame for the 1992 Black Wednesday debacle was and is still placed firmly and squarely on the shoulders of the Bundesdank.

Had support been forthcoming ...and remember the DM /Sterling peg at 2.90 was what it was all about , the pound would have survived intact. John Major to this very day believes that it was hostilty towards Britain that prevented any help. When the French Franc came under pressure the Bundesbank gladly assisted. The BOE received not a pfennig of help. Indeed frantic calls by John Major were not even answered !

Edited March 27, 2007 by topfield

[chiang mai]

Well it looks like that's the answer Topfield, the reason the Baht was strengthening was because the Thai banks decided to get in on the onshore/offshore game and sell Baht to make a profit. How ironic and how typical - even though the country's exporters, the banks customers, are starting to feel pain the banks pile in on the other side out of sheer greed and make the pain even worse.

[ovenman]

I notice that the Bloomberg television channel is now listing the "Offshore" and the "Thailand" rates for the baht separately on their continuous currency crawl. When did they start that?