THai baht stronger and stronger

[kevin612]

Baht is rising a lot this week.

[SNUMAND]

????

Edited October 6, 2019 by SNUMAND

[SNUMAND]

1 hour ago, GalaxyMan said:

Try telling that to Denmark, Sweden, Norway, Finland, Iceland, Netherlands...total nonsense.

Not one of the countries you mention has socialism as their governing body they are all super capitalist with a high level of welfare,total nonsense

Edited October 6, 2019 by SNUMAND

[jingjai9]

Seems like no one can answer your question.

 

[Thingamabob]

The black/underground economy is flat out booming. And by that I am not referring to pubs, clubs and related activities. Thinking caps on and try to figure it out.

[Max69xl]

On 10/5/2019 at 2:38 PM, RichardColeman said:

She tell you about her flying car and ability to predict the future too ? 

Exactly,how many ordinary thai girls get $1100 a month? 

[Bruce404]

3 hours ago, Isaan sailor said:

Thai Baht strong because Bank of Thailand prefers to take in hot money inflows from foreign (Chinese) buyers.  It bolsters foreign currency reserves--and lines some pockets.  They don't really care about expats, western tourism or exports.  And this suits their master, China, just fine.

    I think Isaan Sailor makes a valid point: that appreciation of the Baht results from intentional human intervention by the central bank, implying it is not a result postulated by others on this forum to be a consequence of natural ups and downs of global markets, political events, trade wars, and other causes.  (Although I do not agree with all the reasons he suggests are motivating the policy.)

 

    I am no economist, although I read the magazine regularly, including its essays on global finance and currencies. With that disclaimer, it seems to me the slow but steady increase in value of the Baht in relation to other currencies (e.g., US$, Euro €, and Pound Sterling £) over many, many months must result from national policy set at the highest levels, for reasons that remain inscrutable.

 

    The appreciating Baht certainly hurts several major sectors of the Thai economy:   Manufacturing and agricultural exports become dearer in foreign markets.  The higher prices foreign tourists must pay to visit here make other countries more competitive to attract their holidays.  Imports become less costly, diverting sales by domestic manufacturers that serve primarily the domestic market.

 

    In theory, the only winners are those who earn income outside these sectors, or have accumulated assets they want to be worth more when moved overseas.

 

     Another explanation for the policy might be fear of being accused of currency manipulation by Trump, and thus put on his *hit list, as he has China.  But actual currency manipulators usually try to keep their currency undervalued in order to promote their own export industries, not overvalued as is happening in Thailand.  

 

     Certainly among the readership of ThaiVisa there must be accomplished PhD economists with expertise in the domains of international finance, exchange rates, central banking and monetary policy.  Hopefully, some of them will weigh in, anonymously, to educate us on why they think this is happening. (We need a Thai Paul Krugman.)

 

Edited October 6, 2019 by Bruce404

[Max69xl]

The inflating rate 2019 is way to low. Because of that prices for everything increases.

"Thailand's annual inflation rate fell to 0.32 percent in September 2019 from 0.52 percent in August and below market expectations of 0.44 percent".

1,8-2% should be a more normal number.

[peter48]

_{They have large amounts of foreign reserves which boosts the baht. Why Thailand so much higher than other countries do not know.} 

[Thaidream]

3 hours ago, Isaan sailor said:

Thai Baht strong because Bank of Thailand prefers to take in hot money inflows from foreign (Chinese) buyers.  It bolsters foreign currency reserves--and lines some pockets.  They don't really care about expats, western tourism or exports.  And this suits their master, China, just fine.

China has a huge dollar surplus and it's goal is to control the rest of Asia.  Massive inflows into Thailand have caused a huge rise in Thailand's foreign reserves- inflows come from large numbers of tourists; speculation in the markets; purchases of condo's and  monies being lent.

 

What is interesting is that Thailand's budget continues in deficit; there is not enough tax revenue and  inflation is starting to  rise. 

 

There is alot of uncertainty in the markets with the US-China trade War; Brexit and problems in Hong Kong.  I wouldn't  bet against the US Dollar or Sterling yet.

[roquefort]

49 minutes ago, Max69xl said:

The inflating rate 2019 is way to low. Because of that prices for everything increases.

"Thailand's annual inflation rate fell to 0.32 percent in September 2019 from 0.52 percent in August and below market expectations of 0.44 percent".

1,8-2% should be a more normal number.

That is part of the reason. Real interest rates (i.e. interest rate less inflation) are higher than in most other countries, hence inflow of "hot" money. One third of world sovereign debt currently has NEGATIVE interest rates. If you're guaranteed to lose money investing in Japan, Switzerland and most of Europe, why wouldn't you invest in a country which still has low but positive real interest rates? 

[Max69xl]

13 minutes ago, roquefort said:

That is part of the reason. Real interest rates (i.e. interest rate less inflation) are higher than in most other countries, hence inflow of "hot" money. One third of world sovereign debt currently has NEGATIVE interest rates. If you're guaranteed to lose money investing in Japan, Switzerland and most of Europe, why wouldn't you invest in a country which still has low but positive real interest rates? 

You're correct. 

[Max69xl]

23 minutes ago, Thaidream said:

China has a huge dollar surplus and it's goal is to control the rest of Asia.  Massive inflows into Thailand have caused a huge rise in Thailand's foreign reserves- inflows come from large numbers of tourists; speculation in the markets; purchases of condo's and  monies being lent.

 

What is interesting is that Thailand's budget continues in deficit; there is not enough tax revenue and  inflation is starting to  rise. 

 

There is alot of uncertainty in the markets with the US-China trade War; Brexit and problems in Hong Kong.  I wouldn't  bet against the US Dollar or Sterling yet.

The inflation is not rising, it's the other way around 2019 so far. It's way below the expected rate. That's one reason for increasing prices.

[Guderian]

5 hours ago, villerupt said:

don't forget the question please ...

anybody to explain clearly, without too much technical details, why the THB is so strong?

thx

Currency manipulation by the Chinese government for its own nefarious purposes.

[khunPer]

On 10/5/2019 at 8:49 AM, parafareno said:

Is it inflation in Thailand or what

Inflation normally don't change currency exchange rate to a stronger currency; inflation mean that the money loose value, and if inflation is isolated to a single country you should get more baht for your foreign currency.

 

Edit: Thai consumer price inflation index is about 1 percent a year, or less, in average.

 

Euro is loosing value against USD, and Thailand's baht has historically more or less followed the USD, but is actually getting stronger on it's own, partly – or mainly – due to foreign currency inflow. A high attractive interest rate might be a cause among others, and higher export than import another reason; and increasing foreign tourism also bring some foreign currency in, the tourism currency value has increased from about 10 percent to up around 20 percent compared to total export values, from what I see in news and stats.

 

 

Another news article yesterday talked about easing the currency restrictions for outflow of Thai baht, so Thais could invest more abroad.

 

To my happy surprise I've found that the Thai SET stock market don't fall as much as the outside World – for some time I already had the impression that the Thai stock market has a life of it's own, and therefore is good dividend investments for expats that wish to avoid some of the (bad) currency exchange rate deviations – might even be that some foreign capital flows in as "safe heaven"...????

 

It seems like the last glide of towards stronger baht began at the end of last year, when the official interest rate was raised from 1.50 percent to 1.75 persent. Recently it was again lowed to 1.50 percent again, but US and Europe soon also followed with lower interest rates, so the interest rate hike quickly disappeared. 

 

About your girly friend's wages. The minimum wage was raised from little over 200 baht a day to 300 baht a day some years ago, pushing a bit to prices depending of low qualified labor. But a 3 times wage hike in a level over the minimum wage I've not heard about – equivalent from 300 USD to 1,100 USD, i.e. 300 x 33 to 1,100 x 30 – perhaps you are meeting girls from another social level now?????

 

 

 

 

Edited October 6, 2019 by khunPer

[JohanB]

2 hours ago, BestB said:

Budget surplus , huge foreign reserves and capital inflow is why this is happening .

 

how true or inflated any of the above is anyone’s guess

Were do you get budget surplus from?

Thailand has had  2-3% deficits in the budgets for many years.

 

”The government has set an expenditure of Bt3.2 trillion for fiscal 2020 with a deficit of Bt469 billion, compared to Bt450 billion estimated by the previous administration.”

 

The foreign reserves, due to inflow of hot (black) chinese money is together with a high interest rate the only reason for the overvalued baht.

The government and BOT very  little efforts to stop this and tourism & export are seriously hurt.

[ratcatcher]

4 hours ago, soalbundy said:

Nobody ever went broke underestimating the sense of good taste of the American public

Now that you Mencken it, I agree.

[MosMing]

Remember the early 90's and the Tiger Economies?

In May, 1997 when I first came to Thailand, I got 43 baht for each of my British pounds. By December, I was getting 80.

Unless something's done to arrest the Baht's march upwards, there's a good chance the bubble will burst again and us expats will be back once more in the land of milk and honey. 

[Max69xl]

6 minutes ago, khunPer said:

Inflation normally don't change currency exchange rate to a stronger currency; inflation mean that the money loose value, and if inflation is isolated to a single country you should get more baht for your foreign currency.

 

Edit: Thai consumer price inflation index is about 1 percent a year, or less, in average.

 

Euro is loosing value against USD, and Thailand's baht has historically more or less followed the USD, but is actually getting stronger on it's own, partly – or mainly – due to foreign currency inflow. A high attractive interest rate might be a cause among others, and higher export than import another reason; and increasing foreign tourism also bring some foreign currency in, the tourism currency value has increased from about 10 percent to up around 20 percent compared to total export values, from what I see in news and stats.

 

 

Another news article yesterday talked about easing the currency restrictions for outflow of Thai baht, so Thais could invest more abroad.

 

To my happy surprise I've found that the Thai SET stock market don't fall as much as the outside World – for some time I already had the impression that the Thai stock market has a life of it's own, and therefore is good dividend investments for expats that wish to avoid some of the (bad) currency exchange rate deviations – might even be that some foreign capital flows in as "safe heaven"...????

 

It seems like the last glide of towards stronger baht began at the end of last year, when the official interest rate was raised from 1.50 percent to 1.75 persent. Recently it was again lowed to 1.50 percent again, but US and Europe soon also followed with lower interest rates, so the interest rate hike quickly disappeared. 

 

About your girly friend's wages. The minimum wage was raised from little over 200 baht a day to 300 baht a day some years ago, pushing a bit to prices depending of low qualified labor. But a 3 times wage hike in a level over the minimum wage I've not heard about – equivalent from 300 USD to 1,100 USD, i.e. 300 x 33 to 1,100 x 30 – perhaps you are meeting girls from another social level now?????

 

 

 

 

A low inflation rate makes prices go up,and the inflation rate so far 2019:

 

"Thailand's annual inflation rate fell to 0.32 percent in September 2019 from 0.52 percent in August and below market expectations of 0.44 percent."

[ratcatcher]

1 minute ago, MosMing said:

Remember the early 90's and the Tiger Economies?

In May, 1997 when I first came to Thailand, I got 43 baht for each of my British pounds. By December, I was getting 80.

Unless something's done to arrest the Baht's march upwards, there's a good chance the bubble will burst again and us expats will be back once more in the land of milk and honey. 

[Bruce404]

49 minutes ago, Max69xl said:

A low inflation rate makes prices go up,and the inflation rate so far 2019:

 

"Thailand's annual inflation rate fell to 0.32 percent in September 2019 from 0.52 percent in August and below market expectations of 0.44 percent."

    I do not understand Max69sl's statement that "A low inflation rate makes prices go up ... ."  Thai seems to be an inverse tautology or contradiction in terms:  the rate is calculated by what happens with prices, they are inextricably linked in one direction only.  Not the other way around.

    Perhaps Max69xl really means "low interest rates" (set by monetary authorities) when he writes "low inflation rate". 

    Inflation is measured by the rate of change in the prices of goods over time. If prices rise fast, that is a high inflation rate.  If slowly, that is a low inflation rate.

     If prices remain the same over an interval of time, it is zero inflation, which frightens to death central banks, economists, and elected politicians.  If prices soon start to fall, it becomes "negative" inflation, a.k.a. deflation. 

     When the price of something next week or next month will be lower than now (i.e., deflation), consumers and companies will stop buying and wait for the lower price.  That sends economic activity into a tailspin and recession or even depression usually results. 

Edited October 6, 2019 by Bruce404

[pacovl46]

This is what a quick google search brought up:

 

The Thai baht has been the best performing currency in emerging Asia since 2018. On a year-on-year basis, it has roared more than 8 percent against the U.S. dollar and this year reached a six-year high. But according to news headlines and commentary, the strong currency has lowered the country’s competitiveness and worsened both goods exports and tourism, two major drivers of Thailand’s economy.

 

Currency appreciation is not unique to Thailand. Bank of Thailand (BOT) officials and currency analysts explain the strength of the baht by domestic factors. Thailand’s solid economic fundamentals — a current account surplus and substantial foreign reserves together with a hawkish central bank — lure capital inflows. Many consider the baht a safe haven currency among other emerging market currencies due to its stability. As a result, the baht is likely to retain or increase in value, attracting speculative capital inflows and placing upward pressure on the currency.

 

In early 2019, the BOT did not seem concerned about the Thai baht’s appreciation, as a strong currency can actually benefit Thai importers and those who have foreign currency debts. It can also help improve the country’s terms of trade.

 

But the baht’s persistent strength and its potential negative impacts on the export-driven Thai economy have since prompted concern. Exports contracted for a fourth straight month in June and the BOT revised its GDP growth forecast for 2019 downward, from 3.8 percent to 3.3 percent.

Measures have since been taken to reduce baht appreciation. In July 2019, the BOT lowered the cap on the outstanding balance of non-resident accounts by a third and cut its supply of three- and six-month bonds at auctions in July and August. In addition, the BOT has signalled plans to further relax restrictions on outward portfolio investment by Thai investors, which can also help stem currency appreciation. In August 2019, the BOT cut the policy rate by 25 basis points from 1.75 percent to 1.5, a shift in the BOT policy stance since a raise by 25 basis points in December 2018.

 

Still, many believe that these measures are inadequate. There are three main further measures being discussed: foreign exchange intervention aimed directly at the baht’s value, a policy rate cut, and imposing capital controls to curb speculative inflows.
 

The BOT regularly intervenes in the foreign exchange market, but with strong market expectations this can be costly and countereffective. By purchasing foreign reserves in exchange for Thai baht, the central bank in practice helps keep the baht cheap and less volatile. Increasing foreign reserves and the stability of the baht could further reinforce its character as a safe haven currency.

 

BOT intervention makes the baht an ideal speculative asset. This can create a spiral of bullish speculation — followed by more foreign exchange intervention — leaving the economy with high liquidity or high interest rates if the central bank mops up excess liquidity through open market sales. The central bank also incurs costs when there are increases in the interest rate differentials between domestic and foreign assets and when the BOT fails to prevent baht appreciationThe large amount of foreign exchange reserves (39.9 percent of GDP and over 200 percent of the IMF’s standard reserve adequacy metric in 2018) may put Thailand on the U.S. watch list for currency manipulators. Overall, bold intervention by the BOT is unlikely.

 

To tame offshore fund inflows causing a rapid appreciation of the baht, capital controls are effective at least in the short to medium term. But capital controls have long-lasting adverse consequences, affecting the country’s credibility and financial markets. In 2006, the BOT imposed controls on capital inflows to stem a previous bout of strong baht appreciation. The stock market plummeted and bond yields spiked, causing the central bank to lift some of the controls within a day. Thus capital controls are also unlikely given their long-term impact.

 

The most requested measure by the private sector is for the central bank to cut the policy rate. A common belief is that further rate cuts would make the Thai baht less attractive for foreign investors, reducing pressure on the baht. Yet, if the funds flow into Thailand because of the safe haven currency perception, rather than for a high yield, it is unclear whether rate cuts will be effective. More importantly, easing policy may worsen already elevated household debt, which is 78.6 percent of GDP (among the highest in Asia), jeopardizing Thailand’s financial stability. But it may be Thailand’s only option given that a fragile political situation may thwart more fiscal stimulus.

 

The strong baht may just be a product of global trends that are contracting exports, particularly sluggish global growth and trade tensions. Further, to weaken the baht is not easy when other countries are pursuing even more aggressive easing policies. Still, many hope for at least another rate cut this year, even if it may increase household debt.

[Stevemercer]

The reasons for the appreciating Baht have been explained by other posters and result from BoT policies and actions over the last 10 years.

 

But the real reason is that the current government sees a high Baht as being in its interests and is comfortable with the situation. If the government believed that the high Baht was damaging to their interests then they would say so and the Baht would fall.

 

The big question is why the government supports a strong Baht? I've heard no official explanation.

[Sumarianson]

7 hours ago, PatOngo said:

America will gain another 4 years of disrespect! Voters can't be that naive, can they?

Bush had a second term, I would say not naive but stupid americans.

[GalaxyMan]

2 minutes ago, Sumarianson said:

Bush had a second term, I would say not naive but stupid americans.

Plain eat up with dumb.

[BestB]

41 minutes ago, Stevemercer said:

The reasons for the appreciating Baht have been explained by other posters and result from BoT policies and actions over the last 10 years.

 

But the real reason is that the current government sees a high Baht as being in its interests and is comfortable with the situation. If the government believed that the high Baht was damaging to their interests then they would say so and the Baht would fall.

 

The big question is why the government supports a strong Baht? I've heard no official explanation.

Maybe because it gives good rate to be able to buy more in Germany ????

[johnarth]

7 hours ago, PatOngo said:

America will gain another 4 years of disrespect! Voters can't be that naive, can they?

you better hope so lol

[Deerculler]

A question was asked as to why the Baht is getting stronger.

 It would be very nice if someone else came up with a sensible reply.

[Ketyo]

"The foreign reserves, due to inflow of hot (black) chinese money is together with a high interest rate the only reason for the overvalued baht."

 

What exactly are these inflows of hot (black) Chinese money that has been talked about for years. Is it just Chinese getting money out of China and parking it in Thai government bonds or condos? And why is it "hot" or "black" money? Because its over the 50k annual limit for the Chinese?

Edited October 6, 2019 by Ketyo

[CygnusX1]

The huge amount of Chinese money that’s been flowing into the Australian property market doesn’t seem to have done much for the value of the $A.

I’m not an economist, but I don’t think that devaluing a country’s currency is a magic cure for the ills of its economy, otherwise countries like Argentina would be economic powerhouses.

Edited October 6, 2019 by CygnusX1