The Baht Goes Crazy

[sonicdragon]

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.

What actual facts are you referring to ?

If a foreigner wants to speculate on the appreciation of the baht s/he must sell foreign currency and buy baht offshore. Since curbing such speculation was the stated reason of the BoT for introducing capital controls in the first place, I believe this to be a satisfatory explantion.

The price of baht offshore must be a reflection of actual supply and demand, don't you think ? I mean, dealers in the major inter-bank markets are at this very moment sitting at their desks in singapore, HK, tokyo, london etc making prices in THB/USD and trading it, and they are free to make whatever price they want, and like they do in other pairs, they decide their pricing mainly on actual flows.

But you are implying that I have missed something, so please elaborate....

[ArranP]

I noticed the GBP / THB pair flucuates 1 or 2 % alot of the time.

I don't know yet where I can "currency trade" this pair, does anyone know an online site that does ? hopefully with a GBP trading account ?

Thanks for feedback.

[sonicdragon]

I noticed the GBP / THB pair flucuates 1 or 2 % alot of the time.

I don't know yet where I can "currency trade" this pair, does anyone know an online site that does ? hopefully with a GBP trading account ?

Thanks for feedback.

As topfield has said on a number of occasions, THB/GBP is not an actively traded pair. It is the product of the combination of THB/USD and USD/GBP so when you see fluctuations in the cross rate you are seeing either the result of one of those pairs moving, or both of them moving - obviously this means that the cross rate movements can be amplified or dampenned by corresponding moves in the main pairs.

[ArranP]

I think I get it, so thats why the baht is so strong from the sterling at the moment because the dollar is weak.

[sonicdragon]

I think I get it, so thats why the baht is so strong from the sterling at the moment because the dollar is weak.

No, if the dollar were just weaker, by the same extent, against the baht and the pound, then there would be no effect on the cross. But, for example, if the dollar weakened 1% against the baht but rose 1% against the pound, then the baht would strenthen against the pound by 2%

[ArranP]

Thanks SonicD, thats helped improve my understanding.

[Naam]

But you are implying that I have missed something, so please elaborate....

wrong perception from your side. i just stated my personal opinion. as far as the demand/supply situation is concerned my bankers concurred with your opinion a couple of months ago. now they have changed their mind and are as clueless as i am. according to them THB forex trade has more or less ground to a halt, there is ample supply, not too much demand and still the offshore rate shows a relatively huge discrepancy vs. onshore.

[LaoPo]

But you are implying that I have missed something, so please elaborate....

wrong perception from your side. i just stated my personal opinion. as far as the demand/supply situation is concerned my bankers concurred with your opinion a couple of months ago.

now they have changed their mind and are as clueless as i am. according to them THB forex trade has more or less ground to a halt, there is ample supply, not too much demand and still the offshore rate shows a relatively huge discrepancy vs. onshore.

That's odd and interesting at the same time

It would mean the Baht is artificially high...much higher than it should be - but we knew that already, didn't we?-

But, if the bankers* have no clue.....WHO HAS ?

Weird situation and it doesn't 'promise' very good things to happen in the near future...

* meaning: S'pore Bankers are not the most stupid in the world -of High Finance-......

SO: who is ?

LaoPo

[sonicdragon]

But you are implying that I have missed something, so please elaborate....

wrong perception from your side. i just stated my personal opinion. as far as the demand/supply situation is concerned my bankers concurred with your opinion a couple of months ago. now they have changed their mind and are as clueless as i am. according to them THB forex trade has more or less ground to a halt, there is ample supply, not too much demand and still the offshore rate shows a relatively huge discrepancy vs. onshore.

I usually think in accordance with the principle that if it looks like duck, walks like a duck and quacks like a duck, then it probably is a duck :-)

If I'm not mistaken I think wouldn't argue with my explantion for the offshore rate being stronger than the onshore rate (would you ?) - rather, you are not convinced about it explaining the *extent* of the strength ? In other words, do you agree that there should be a premium, given the capital controls, but you don't agree that it should be as big as it is ?

[Naam]

If I'm not mistaken I think wouldn't argue with my explantion for the offshore rate being stronger than the onshore rate (would you ?) - rather, you are not convinced about it explaining the *extent* of the strength ? In other words, do you agree that there should be a premium, given the capital controls, but you don't agree that it should be as big as it is ?

quite correct!

[Khun Bob]

All - this is off topic - but this thread has soem well educated and informed people contributing to it. If I wanted to learn about forex and bond markets and how to trade in them to potentially my advantage, where would be the best places to look for resources and to get initial experience in this ?

Hope you can cast me a few good leads, as I aspire to do what you are doing...

Thanks in advance

[Naam]

All - this is off topic - but this thread has soem well educated and informed people contributing to it. If I wanted to learn about forex and bond markets and how to trade in them to potentially my advantage, where would be the best places to look for resources and to get initial experience in this ? Hope you can cast me a few good leads, as I aspire to do what you are doing...

Thanks in advance

i'd be happy to assist but i am afraid i am not a good lecturer except for specific questions which i might be able to answer (based on my knowledge and experience). a wealth of information on "investing in bonds" can be found surfing the internet. trading currencies is a different animal and my personal view is that only investors with profound knowledge and years of experience should consider to trade. even then it happens all the time that the financial wizzards of big multinational banks make big mistakes. my view is also that trading currencies is like going into a casino and betting on red or black.

perhaps it is worthwhile to mention that my educational background is not related at all to any finance science but as a former physicist i know my maths and made good use of it. a good part of whatever knowledge i gathered in nearly three decades of investing was by "trial and error" and needless to say with "ups and downs". luckily there were many more ups than downs.

in the present global financial environment i also don't see too much profit trading bonds but i am a firm believer of investing in bonds. we had nearly a decade of big bond price fluctuations, alas... that period ended more or less two years ago. the same goes for yields. five years ago i wouldn't have looked at debtors (sovereign and corporates) who offered a yield of less than 15%, in some not so rare cases yields of 20% were quite common. nowadays i scour the bond market's new emissions and consider myself lucky if i find in €UR a 7.5% and in USD a 9.5% yield (all of course in relation to risk).

[sonicdragon]

All - this is off topic - but this thread has soem well educated and informed people contributing to it. If I wanted to learn about forex and bond markets and how to trade in them to potentially my advantage, where would be the best places to look for resources and to get initial experience in this ?

Hope you can cast me a few good leads, as I aspire to do what you are doing...

Thanks in advance

I would advise first getting a good grounding in the way that financial markets work and learning some basic theory about the main types of securities and derivatives and how to value them. I can recommend the following book - Financial Market Analysis by David Blake . It's quite thorough, yet not mathematically complex, while at the same time not too lengthy.

http://www.amazon.com/Financial-Market-Ana...e/dp/047187728X

If your are more mathematically inclined I can highly recommend Dynamic Asset Pricing by Darrell Duffie

http://www.amazon.com/Dynamic-Asset-Pricin...d/dp/0691021252

[PCA]

All - this is off topic - but this thread has soem well educated and informed people contributing to it. If I wanted to learn about forex and bond markets and how to trade in them to potentially my advantage, where would be the best places to look for resources and to get initial experience in this ?

Hope you can cast me a few good leads, as I aspire to do what you are doing...

Thanks in advance

Bob,

if you want to trade currencies then dont go to start with Forex. All Forex Brokers are bucket shops. Forex is an unregulated market and the so called advantage of no fees but only the pip Spread to pay is a very dangerous trap.

The easiest way to trade currencies is with the futures contracts at the CME. Best and most profitable strategy therefore especially for beginners is trading Currency Spreads like the example shown below. There are a few trades for different Currency pairs with low risk/high reward ratios based on seasonality every year. Margin requirements are reduced compared to trading outright futures and those Spreads trend more often, nicer, safer and even more dramatically most of the time.

Absolutely keep your fingers from intraday trading the outrights unless you really know what you are doing.

Bonds (Government bonds) are also excellent markets for both, day- and position trading. Corporate bonds are good for medium to long term investments chosen on your risk profile.

[Naam]

Bonds (Government bonds) are also excellent markets for both, day- and position trading.

i strongly beg to differ! for a private investor bid/ask spreads and trading fees are much too high and price fluctuations of bonds too low in order to achieve any profit in day trading.

edited for grammar

Edited March 31, 2007 by Dr. Naam

[Khun Bob]

All

Thanks for the good advice.

Going to start reading...

I'm also interested i trading systems. I recently read in the UK financial times that small investors can compete and exceed on %profits to large corporate investors, when they produce their own trading system. Thanks to the internet price information and the ability to execute trades real-time is feasible.

However a pomit was made than any 'system' only has a certain life as the climate changes.

Is there such a thing as a generic or open source trading system that will execute trades for you and accept data feeds - and allow you to do the programming inside so you can set the rules of the trading system ?

Thanks in advance..

PS I've been watching forex for the currencies I am interested in for over 8 years. At one stage I was able to predict to a good degree what the daily movements were likely to be. However, now that ability has gone... Markets change...

[PCA]

Bonds (Government bonds) are also excellent markets for both, day- and position trading.

i strongly beg to differ! for a private investor bid/ask spreads and trading fees are much too high and price fluctuations of bonds too low in order to achieve any profit in day trading.

edited for grammar

Man you are really funny. Where is all the great wisdom from? Bid/ask is narrow for the spot month and fees are fractions of those that you pay.

Who or what do you want to advise here? You claimded that your few shots for 30 years were mostly lucky in hindsight. Collecting informations (all crap) digesting and blowing it out with your own 2 cents is not more than an oppinion (not even your own) entirely useless when it comes to make decistions in the financial markets.

Yes and do me a favor and stop quoting my posts when you just want to criticize them.

[ray23]

Where is this really going?

Fortunes are being made by some but in the end it really doesn't look like a good future for Thailand. The what if's seem huge to me. Do I miss my guess in this is this instant money nothing in the works for the future. Paper not baked up by anything more then paper, no substance. I don't have a clue I enjoy reading the thoughts of you guys who do.

Being a novice it seems to me that there will be prices to pay. The guys who do this to earn money will be gone before that happens.

"ECONOMY

Imports slide amid low investor confidence

Thailand's current account surplus unexpectedly widened in January as sliding confidence curbed imports of machinery and consumer goods.

Official data released yesterday showed the surplus rose to $1.54 billion from $1.22 billion in December. The figure was the biggest since January 2000, and the third straight month above $1 billion. Economists had expected a $1-billion surplus.

''Imports slowed significantly as falling investments cut purchases of machinery and equipment,'' said Amara Sriphayak, senior director of the domestic economy department at the Bank of Thailand.

''Business confidence continues to drop on political concerns and a strong baht.''

Consumer and business confidence have declined amid policy reversals and political squabbles in the military-installed government.

The central bank's Monetary Policy Committee is widely expected to cut interest rates for a third time this year when it meets on April 11 to buoy growth and try to limit gains in the baht.

''Confidence must be restored to bring back investments and consumption to boost imports,'' said Isara Ordeedolchest, an economist at Tisco Securities. The surpluses were putting more pressure on the baht, he added.

The currency has climbed 1.3% this month and 2% this year on speculation that exporters are increasing demand for baht as demand for dollars to buy imports slides. The currency surged 16% against the US dollar last year.

The current account balance comprises the difference between exports and imports of goods, services, investment income and remittances. About $700 million of January's surplus came from the service and transfer account, which is mostly tourism earnings, Mrs Amara said.

The trade surplus, based on a balance-of-payments basis, widened to $808 million from $732 million in December, the central bank said. Exports in January increased by 17.8% from a year earlier to $10.4 billion. Imports rose 4%, the slowest since June, to $9.57 billion, the report said.

Manufacturing production in February expanded 5.5% from a year earlier, slowing from 8.4% growth in the previous month. Output was expected to increase 4.5%, according to 12 economists in a Bloomberg survey. Factories in Thailand used 73.5% of their capacity in February, from 76.3%.

''With slowing overseas demand and the stronger baht, most manufacturers are cutting their production to avoid excessive inventory buildup,'' said Mr Isara.

The gauge of business sentiment fell to 42.9 in February from 43.9 in January. The private investment index, measuring items such as cement sales, imports of capital goods and licensing of new factories, declined 1.8% last month, compared with January's 0.8% drop.

The private consumption index, comprising electricity use, imports of consumer goods and gasoline sales, retreated 1.2% in February, the central bank said.

Tourist arrivals last month rose 6.4% from a year earlier to 1.26 million, from 1.29 million visitors in January.

The consumer confidence index, meanwhile, fell for a fourth month in February, dropping to a six-month low. The gauge has declined for 15 of the past 17 months, gaining only in September and October of last year.BLOOMBERG "

[sonicdragon]

Bonds (Government bonds) are also excellent markets for both, day- and position trading.

i strongly beg to differ! for a private investor bid/ask spreads and trading fees are much too high and price fluctuations of bonds too low in order to achieve any profit in day trading.

edited for grammar

Man you are really funny. Where is all the great wisdom from? Bid/ask is narrow for the spot month and fees are fractions of those that you pay.

Who or what do you want to advise here? You claimded that your few shots for 30 years were mostly lucky in hindsight. Collecting informations (all crap) digesting and blowing it out with your own 2 cents is not more than an oppinion (not even your own) entirely useless when it comes to make decistions in the financial markets.

Yes and do me a favor and stop quoting my posts when you just want to criticize them.

PCA, it sounds a lot like you are not talking about government bonds at all, but rather about futures on government bonds ? I've never seen or heard the terminology of "spot month" in relation to government bonds (it doesn't really make any sense) - only in futures (where the more usual terminology is "front month". And of course you are right about the bid/ask and trading commissions on futures. However, a big distinction should be made between government bonds and futures on government bonds.

Edited April 1, 2007 by sonicdragon

[LoveDaBlues]

I feel the baht won't drop below 34 (I'm talking against the USD and when xchanged here in LOS). I'm no expert; just a gut feeling that it's leveling off now and within 1 year will crawl back to 40.

Maybe it's just wishful thinking........bet on black.......

[PCA]

Bonds (Government bonds) are also excellent markets for both, day- and position trading.

i strongly beg to differ! for a private investor bid/ask spreads and trading fees are much too high and price fluctuations of bonds too low in order to achieve any profit in day trading.

edited for grammar

Man you are really funny. Where is all the great wisdom from? Bid/ask is narrow for the spot month and fees are fractions of those that you pay.

Who or what do you want to advise here? You claimded that your few shots for 30 years were mostly lucky in hindsight. Collecting informations (all crap) digesting and blowing it out with your own 2 cents is not more than an oppinion (not even your own) entirely useless when it comes to make decistions in the financial markets.

Yes and do me a favor and stop quoting my posts when you just want to criticize them.

PCA, it sounds a lot like you are not talking about government bonds at all, but rather about futures on government bonds ? I've never seen or heard the terminology of "spot month" in relation to government bonds (it doesn't really make any sense) - only in futures (where the more usual terminology is "front month". And of course you are right about the bid/ask and trading commissions on futures. However, a big distinction should be made between government bonds and futures on government bonds.

Amen and agreed.

My post was more a reply to Khun Bob's post asking about Forex and that stuff. I have stated that Bonds are good markets for daytrading and for position trading, actually all readable in my post before.

Daytrading of course applies to the Futures Contracts, so here's my apology for/if widespreading confusion.

Fact is that one should read all posts in context as a whole and reply as constructive as possible and not driven by lime light emotions. With the last sentence I don't mean you sonic.

[Naam]

Man you are really funny. Where is all the great wisdom from? Bid/ask is narrow for the spot month and fees are fractions of those that you pay.

Who or what do you want to advise here? You claimded that your few shots for 30 years were mostly lucky in hindsight. Collecting informations (all crap) digesting and blowing it out with your own 2 cents is not more than an oppinion (not even your own) entirely useless when it comes to make decistions in the financial markets.

Yes and do me a favor and stop quoting my posts when you just want to criticize them.

i am quite aware of that. all little boys who have no money in their pockets and are therefore trying to make a buck or two trading options or futures keep on telling me so.

QUOTE(PCA @ 2007-04-01 01:19:49) Bonds (Government bonds) are also excellent markets for both, day- and position trading.

by the way, i did not criticize you but only proved that you spread rubbish.

[sonicdragon]

Bonds (Government bonds) are also excellent markets for both, day- and position trading.

i strongly beg to differ! for a private investor bid/ask spreads and trading fees are much too high and price fluctuations of bonds too low in order to achieve any profit in day trading.

edited for grammar

Man you are really funny. Where is all the great wisdom from? Bid/ask is narrow for the spot month and fees are fractions of those that you pay.

Who or what do you want to advise here? You claimded that your few shots for 30 years were mostly lucky in hindsight. Collecting informations (all crap) digesting and blowing it out with your own 2 cents is not more than an oppinion (not even your own) entirely useless when it comes to make decistions in the financial markets.

Yes and do me a favor and stop quoting my posts when you just want to criticize them.

PCA, it sounds a lot like you are not talking about government bonds at all, but rather about futures on government bonds ? I've never seen or heard the terminology of "spot month" in relation to government bonds (it doesn't really make any sense) - only in futures (where the more usual terminology is "front month". And of course you are right about the bid/ask and trading commissions on futures. However, a big distinction should be made between government bonds and futures on government bonds.

Amen and agreed.

My post was more a reply to Khun Bob's post asking about Forex and that stuff. I have stated that Bonds are good markets for daytrading and for position trading, actually all readable in my post before.

Daytrading of course applies to the Futures Contracts, so here's my apology for/if widespreading confusion.

Fact is that one should read all posts in context as a whole and reply as constructive as possible and not driven by lime light emotions. With the last sentence I don't mean you sonic.

Yes, as someone else on this forum aptly mentioned recently, quoting George Bernard Shaw "the single biggest problem with communication is the illusion that it has taken place" :-)

I re-read your original post, and have to say that, even now, it's hard to see how you were talking about bond futures rather than the cash market - perticularly since you mentioned corporate bonds in the next sentence. Thus I believe Dr Naam was quite correct in disagreeing strongly and I don't think it was quite right for you to go off at him like that (just my humble opinion).

Personally, I'm not a day trader. I know why bond futures are appealing to day traders - but a word of caution should be sounded: bond futures are complex instruments - even if you have a very thorough understanding of (cash) bond pricing and trading, futures on bonds are another matter alltogether with settlement, margin, and delivery issues, and price behaviour that differs with (cash) bonds.

I think this just underlines the need to get a firm grounding in financial markets generally, as per my earlier post.

[PCA]

Man you are really funny. Where is all the great wisdom from? Bid/ask is narrow for the spot month and fees are fractions of those that you pay.

Who or what do you want to advise here? You claimded that your few shots for 30 years were mostly lucky in hindsight. Collecting informations (all crap) digesting and blowing it out with your own 2 cents is not more than an oppinion (not even your own) entirely useless when it comes to make decistions in the financial markets.

Yes and do me a favor and stop quoting my posts when you just want to criticize them.

i am quite aware of that. all little boys who have no money in their pockets and are therefore trying to make a buck or two trading options or futures keep on telling me so.

QUOTE(PCA @ 2007-04-01 01:19:49) Bonds (Government bonds) are also excellent markets for both, day- and position trading.

by the way, i did not criticize you but only proved that you spread rubbish.

What did you prove, you are so poor in your thoughts that you dont realize what crap you are releasing.

I am not 30 years in the market thats the only advantage you refer to. I have more money than you, I make more money than you and I kick your ass in every market in any time frame. How does that sound to you?

Edited April 1, 2007 by PCA

[sonicdragon]

Come on children, please play nice, or the mods will close the thread (maybe about time actually!)

Unless you disagree with what I said in my previous post, Dr Naam and PCA, you are both right. You are just talking about different things.

[PCA]

Come on children, please play nice, or the mods will close the thread (maybe about time actually!)

Unless you disagree with what I said in my previous post, Dr Naam and PCA, you are both right. You are just talking about different things.

Its not about being right or being wrong. Its about how all is presented and how one gets treated after posting more or less useable informations. When a wannabe professor is not able to show some respect to other posts especially in a field where he doesnt have the slightest idea what is going on then it is normal to drag it to a personal level. (Which I didnt start with the little Doc here.) Financials is a very wide range topic and nobody knows everything. Essential is to develop ones own thoughts. Oppinions are important and very good to learn that they are/were mostly wrong or not leading to the projected results while being right. Thats all about it, reaction is asked and not philisophy. Ok, peace from my side now.

[sonicdragon]

Come on children, please play nice, or the mods will close the thread (maybe about time actually!)

Unless you disagree with what I said in my previous post, Dr Naam and PCA, you are both right. You are just talking about different things.

Its not about being right or being wrong. Its about how all is presented and how one gets treated after posting more or less useable informations. When a wannabe professor is not able to show some respect to other posts especially in a field where he doesnt have the slightest idea what is going on then it is normal to drag it to a personal level. (Which I didnt start with the little Doc here.) Financials is a very wide range topic and nobody knows everything. Essential is to develop ones own thoughts. Oppinions are important and very good to learn that they are/were mostly wrong or not leading to the projected results while being right. Thats all about it, reaction is asked and not philisophy. Ok, peace from my side now.

This might be a case of the pot calling the kettle black ?

He said:

"i strongly beg to differ! for a private investor bid/ask spreads and trading fees are much too high and price fluctuations of bonds too low in order to achieve any profit in day trading. "

which was polite, to the point, and correct if I may say so, and then you went off at him rather strongly to say the least.

The subsquent replies by both of you are shameful.

[PCA]

Come on children, please play nice, or the mods will close the thread (maybe about time actually!)

Unless you disagree with what I said in my previous post, Dr Naam and PCA, you are both right. You are just talking about different things.

Its not about being right or being wrong. Its about how all is presented and how one gets treated after posting more or less useable informations. When a wannabe professor is not able to show some respect to other posts especially in a field where he doesnt have the slightest idea what is going on then it is normal to drag it to a personal level. (Which I didnt start with the little Doc here.) Financials is a very wide range topic and nobody knows everything. Essential is to develop ones own thoughts. Oppinions are important and very good to learn that they are/were mostly wrong or not leading to the projected results while being right. Thats all about it, reaction is asked and not philisophy. Ok, peace from my side now.

This might be a case of the pot calling the kettle black ?

He said:

"i strongly beg to differ! for a private investor bid/ask spreads and trading fees are much too high and price fluctuations of bonds too low in order to achieve any profit in day trading. "

which was polite, to the point, and correct if I may say so, and then you went off at him rather strongly to say the least.

The subsquent replies by both of you are shameful.

yeah, was my fault since that little discrepancy started actually in another thread on the same topic field. You cant know that of course. Therefore I apologize to you and all others here reading and posting (except 1 of course )

[sonicdragon]

Great :-)

Now, may I respectfully suggest to Khun Bob, that he starts a new thread on the topic of market investments and trading advice - I will gladly contribute to it, but this particular topic is supposed to be about the Baht, which briings me nicely around to :

If I'm not mistaken I think wouldn't argue with my explantion for the offshore rate being stronger than the onshore rate (would you ?) - rather, you are not convinced about it explaining the *extent* of the strength ? In other words, do you agree that there should be a premium, given the capital controls, but you don't agree that it should be as big as it is ?

quite correct!

You made 2 noteworthy points in your earlier post....

1. Volume has dried up. I don't see how that invalidates the theory. Perhaps the particpants are happy with their current positions ? Most markets go through periods of small volume but it doesn't mean that the price is wrong.

2. There is ample supply, but not too much demand. I must say that I find that idea quite strange, and seems to contradict there being no volume. Call me old-fashioned, but the interbank market trades on quite tight bid-offer spreads, and if there was a large discrepancy in favour of the offer, the market would trade and prices would adjust quickly. I would expect to see an increase in volatility as participants tested the depth of the bid.

Let me try to add some flesh to the theory. Since the withholding tax is 10%, ceteris paribus the theorteical premium should also be 10%. This is because,

1. If it was 10%, speculators would be indifferent between buying the baht onshore or offshore.

2. By extension, if it were less than 10% speculators would prefer to buy the baht offshore. This would put upward pressure on the baht offshore.

3. If it was more than 10%, speculators would buy the baht onshore and pay the withholding tax

so a balance (the clearing price, or an equilibrium even) should be acheived at a 10% premium. The actual market premium will of course be different from 10%. It will be affected by the following:

a. market expectations of a strenghtning onshore rate will cause the premium to widen.

b. market expectations of a weakening onshore rate will cause the premium to shrink.

c. inefficiencies in the market (eg smuggling or other methods that evade the capital controls) will tend to shrink the premium.

d. Uncertainty about future government policy as it affects offshore trading may tend to reduce the premium.

So a current premium of around 7.5-8%, according to this theory, seems to indicate that the market expects the onshore rate to weaken, and perhaps that some people are circumventing the capital controls and that offshore participants don't trust the government.

Although it's an extremely simple theory, it does seem to explain what has been observed. I like simple theories because they are easy to modify and build on. As an adjunct, that I'm sure will ring a few bells with Dr Naam (sarcasm intended), I always remember learning about brownian motion in science class aged about 13 or 14. It seemed splendidly simple but useless. How wrong I was about that on both counts - I couldn't believe it when I discovered 10 years later that most of the theory of finance is based on it :-)

Now I need a beer.

[malcolminthemiddle]

Please stay on topic, or this thread will be closed.

Sonicdragon has shown the way.