The Baht Goes Crazy

[Naam]

Gotta say I'm heading in that direction myself but with a variation. I've just sold a house in NZ and am seriously opening a US dollar term deposit at my bank in NZ. With the US / Kiwi cross at around 0.715, I'm thinking the risk might be worth it.

Bendix,

it all depends in what currency you are thinking. but in my (not so) humble opinion it doesn't make much sense to change kiwi dollars into the currency of the Greatest Nation on Earth™. assuming you will hold cash you lose on interest rate (presently) and perhaps more when FED-Bernanke will start to lower interest rates which will affect market rates and most probably NZD/USD exchange rate.

disclaimer: the majority of my holdings (>55%) is denominated in USD because no other currency offers a similar choice of assets to a diversified investor.

[bendix]

Gotta say I'm heading in that direction myself but with a variation. I've just sold a house in NZ and am seriously opening a US dollar term deposit at my bank in NZ. With the US / Kiwi cross at around 0.715, I'm thinking the risk might be worth it.

Bendix,

it all depends in what currency you are thinking. but in my (not so) humble opinion it doesn't make much sense to change kiwi dollars into the currency of the Greatest Nation on Earth™. assuming you will hold cash you lose on interest rate (presently) and perhaps more when FED-Bernanke will start to lower interest rates which will affect market rates and most probably NZD/USD exchange rate.

disclaimer: the majority of my holdings (>55%) is denominated in USD because no other currency offers a similar choice of assets to a diversified investor.

Apologies for going off-topic, but could you elaborate please Dr Naam. If there is anyone on this board who understands this stuff (and has a record of getting it right) it's you, so I'm interested to hear your thinking.

The Bank of New Zealand has a 7 day term US$ term deposit paying 4.55%. Because of my status, I have no tax liability there, so let's ignore that for the moment. If the Kiwi/US stays the same, I'll earn the coupon rate. If the Kiwi weakens, I'll win two ways up. If the Kiwi continues to strengthen, then it needs to strengthen more than 4.55% for me to lose. Am i getting that right?

I guess you're arguing that Bernanke lowering interest rates will further weaken the greenback . .

[sonicdragon]

disclaimer: the majority of my holdings (>55%) is denominated in USD because no other currency offers a similar choice of assets to a diversified investor.

This is possibly one reason why we don't see a collapse in the dollar in the way that many doomsayers have been predicting for the last few years.

[Naam]

The Bank of New Zealand has a 7 day term US$ term deposit paying 4.55%

that's quite meagre Bendix especially as we are not talking about peanuts but a substantial amount which you received for your property.

i am getting 5.25% on overnight USD. but that's beside the point and we should compare NZD with USD interest rates.

for NZD my bank's rate (one month) is 7.3875% compared to USD (one month) of 5.175%. that's a cool difference of >50%.

[Naam]

If the Kiwi continues to strengthen, then it needs to strengthen more than 4.55% for me to lose. Am i getting that right?

no Bendix, you are not getting it right. except... if you bury your kiwi-dollars interest free in a remote corner of your backyard.

[topfield]

Thanks Dr Naam for your splendid reply to my earlier question.

Do you perhaps know what interest rates are for the offshore baht. I cannot find them on any website.

ie 1 month, 3 month, 6 month and 1 year deposits , as well as overnight money.

Many thanks

[Naam]

disclaimer: the majority of my holdings (>55%) is denominated in USD because no other currency offers a similar choice of assets to a diversified investor.

This is possibly one reason why we don't see a collapse in the dollar in the way that many doomsayers have been predicting for the last few years.

i am convinced that is the reason. at present there is virtually no way for global finance and business to bypass the US-dollar. sure, we might see further weakening but not a total collapse as the doom&gloom prophets are propagating since a long time... at least not during my lifespan

off topic: we really should have a thread for general investment. not necessarily advice but with a tendency towards information. that thread should cover the whole range of TV-members from those struggling to make ends meet to those who are used that their net worth fluctuates up to plus/minus 100.000 dollars daily. just my personal view.

[Naam]

Thanks Dr Naam for your splendid reply to my earlier question.

Do you perhaps know what interest rates are for the offshore baht. I cannot find them on any website.

ie 1 month, 3 month, 6 month and 1 year deposits , as well as overnight money.

Many thanks

i can only post what my bank offers Topfield.

-no overnight rate

-neither 6 mth nor 1 year deposits

-1 mth = 4.375%

-3 mth = 4.250% (the difference indicating that the market expects a rate cut by the BOT).

[topfield]

Thanks Dr Naam for your splendid reply to my earlier question.

Do you perhaps know what interest rates are for the offshore baht. I cannot find them on any website.

ie 1 month, 3 month, 6 month and 1 year deposits , as well as overnight money.

Many thanks

i can only post what my bank offers Topfield.

-no overnight rate

-neither 6 mth nor 1 year deposits

-1 mth = 4.375%

-3 mth = 4.250% (the difference indicating that the market expects a rate cut by the BOT).

Many thanks.

Fascinating ! This shows that although the exchange rate of the onshore/offshore baht is hugely different.....up to ten percent variation............. the interest rates are almost identical

[topfield]

I'm neither ex-public school, nor an investment banker. Sadly, I'm from rural working class origins and my days at a squalid comprehensive school in Great Yarmouth were neither happy, nor beneficial. My alma mater and I parted company on bad terms. And these days I'm forced to earn my living in a humble little law firm

Bravo............straight from Dickens !

[Naam]

This shows that although the exchange rate of the onshore/offshore baht is hugely different.....up to ten percent variation...

and nobody has a logical explanation!

[topfield]

Lesson for potential currency smugglers.

Rate for baht at Mustafa's today Baht 22.98 will buy Sing $ 1

Rate buy S$ 1 at Super Rich Baht 22. 95

Net loss : three satang per Sing dollar

As the onshore mid rate is currently 34.97 to the US dollar and the offshore rate currently 32.1 making a

nine percent difference, anyone know where the profit is going folks ?

Who is giving the incorrect rate/profiteering Super Rich or Mustafa ?

New info below. Seems a note smuggler can make 5 satang per Sing dollar today.

On a million Sing you can make Baht 50, 000 possibly 70,000 if you negotiate .

" I went to Mustafa this morning and asked for a quote to sell Thb into Sgd. He first quoted me

22.98, which was the board rate for fairly small amounts. I said can you better it, he asked for

how much and I said Sgd 50,000, he made a call and improved the rate to 22.90. "

[NB IT IS CURRENTLY ILLEGAL TO TAKE OUT MORE THEN B500,000 IN NOTES TO MALAYSIA]

[bendix]

I'm neither ex-public school, nor an investment banker. Sadly, I'm from rural working class origins and my days at a squalid comprehensive school in Great Yarmouth were neither happy, nor beneficial. My alma mater and I parted company on bad terms. And these days I'm forced to earn my living in a humble little law firm

Bravo............straight from Dickens !

Who will be the Mr Micawber to my David Copperfield?

[topfield]

I'm neither ex-public school, nor an investment banker. Sadly, I'm from rural working class origins and my days at a squalid comprehensive school in Great Yarmouth were neither happy, nor beneficial. My alma mater and I parted company on bad terms. And these days I'm forced to earn my living in a humble little law firm

Bravo............straight from Dickens !

Who will be the Mr Micawber to my David Copperfield?

Can't be me.

I earn only nineteen shillings and eleven pence ha'penny but spend one pound and a ha'penny !

[samran]

bendix and topfield mutual admiration society....

[soundman]

bendix and topfield mutual admiration society....

Private room now open!!! please sign up!!!

Soundman.

[ray23]

Anyone know whats going with the baht

[topfield]

i couldn't resist and changed a substantial amount of offshore THB. paid 31,80 + 15bps for 1 USD. time will tell whether it was a mistake.

An interesting thought...

What's to stop Dr Naam having bought his dollars at 31.80 transfering them back to Thailand and exchanging for baht at 35 the current onshore rate making an immediate and tidy ten percent profit ?

Surely nothing !

You lucky people holding baht offshore !!

[topfield]

IDEAS

So what smugglers could do is to pay the baht into an offshore account in Singapore and then tt them back

Alternatively buy baht in Singapore then pay them in to a baht a/c there then transfer them back to Bangkok and make perhaps 5 percent !

The second suggestion would even be 100 percent kosher !

Edited March 29, 2007 by topfield

[sonicdragon]

i couldn't resist and changed a substantial amount of offshore THB. paid 31,80 + 15bps for 1 USD. time will tell whether it was a mistake.

An interesting thought...

What's to stop Dr Naam having bought his dollars at 31.80 transfering them back to Thailand and exchanging for baht at 35 the current onshore rate making an immediate and tidy ten percent profit ?

Surely nothing !

You lucky people holding baht offshore !!

The thing is, it's not really a profit, because onshore and offshore baht are not fungible. They are apples and oranges at the moment.

[sonicdragon]

IDEAS

So what smugglers could do is to pay the baht into an offshore account in Singapore and then tt them back

Alternatively buy baht in Singapore then pay them in to a baht a/c there then transfer them back to Bangkok and make perhaps 5 percent !

The second suggestion would even be 100 percent kosher !

It wouldn't be kosher because that's exactly what the capital controls on inward remittances are for.

[Naam]

The thing is, it's not really a profit, because onshore and offshore baht are not fungible. They are apples and oranges at the moment.

i beg your pardon Dragon?! it's NOT a profit? i wish i could accomplish a deal like this every month.

[Naam]

"What's to stop Dr Naam having bought his dollars at 31.80 transfering them back to Thailand and exchanging for baht at 35 the current onshore rate making an immediate and tidy ten percent profit ?

Surely nothing !"

of course nothing stops me except the fact that i have enough Baht onshore to cover my living expenses for at least 1½ years as of today. it's much easier to achieve a satisfactory yield with freely convertible currency offshore than with Baht onshore.

[Naam]

Alternatively buy baht in Singapore then pay them in to a baht a/c there then transfer them back to Bangkok and make perhaps 5 percent !

inspite of the fact that i maintain since 2½ years an offshore THB account my bank does not accept deposits of physical Baht. i assume it's the same with other banks in Singapore.

[sonicdragon]

The thing is, it's not really a profit, because onshore and offshore baht are not fungible. They are apples and oranges at the moment.

i beg your pardon Dragon?! it's NOT a profit? i wish i could accomplish a deal like this every month.

Are we talking about the same thing here ? I was referring to you remitting the baht into thailand. If you suddenly require that baht offshore again, then you won't be able to get it there, that's what I mean.

[sonicdragon]

Alternatively buy baht in Singapore then pay them in to a baht a/c there then transfer them back to Bangkok and make perhaps 5 percent !

inspite of the fact that i maintain since 2½ years an offshore THB account my bank does not accept deposits of physical Baht. i assume it's the same with other banks in Singapore.

Same for me in Hong Kong.

[sonicdragon]

The thing is, it's not really a profit, because onshore and offshore baht are not fungible. They are apples and oranges at the moment.

i beg your pardon Dragon?! it's NOT a profit? i wish i could accomplish a deal like this every month.

Are we talking about the same thing here ? I was referring to you remitting the baht into thailand. If you suddenly require that baht offshore again, then you won't be able to get it there, that's what I mean.

Scratch that. Sorry, I see you are talking about holding baht offshore, and now that it has appreciated you have sold it. Yes of course it's a profit.

[Naam]

Scratch that

i will

[sonicdragon]

This shows that although the exchange rate of the onshore/offshore baht is hugely different.....up to ten percent variation...

and nobody has a logical explanation!

I've given my logical explanation several time already:

1. Capital controls exist on the inward remittance of baht. This increases offshore demand.

2. Local banks are banned from selling baht offshore. This reduces the supply of offshore baht.

Increased demand and decreased supply = higher price

Seems pretty logical to me - do you guys disagree or think I missed something ?

[Naam]

Increased demand and decreased supply = higher price

Seems pretty logical to me - do you guys disagree or think I missed something ?

in principle = yes, considering actual facts = NO. what could be a reason that offshore demand surpasses supply? i can't see any. nobody can use THB offshore. if one needs THB onshore one transfers foreign currency and gets the better onshore rate.