The Thai Baht Reached a New 6-Year High. Here’s Why It’s Surging

By Yumi Teso

 

 

Thailand’s central bankers are finding it tough to stop the baht from surging.

 

The currency advanced as much as 0.3% on Friday to 30.187 per dollar, the strongest level since May 2013. That takes its gain to 7.8% this year, more than any of its emerging-market peers except Russia’s ruble.

 

The gains have defied the efforts of Thai authorities, who fear the baht’s strength is becoming a drag on the $505 billion economy. Finance Minister Uttama Savanayana said on Oct. 9 that the central bank should “take care” of the currency.

 

Full story: https://www.bloomberg.com/news/articles/2019-10-25/the-thai-baht-reached-a-new-6-year-high-here-s-why-it-s-surging

 

Bloomberg: 2019-10-26

 

As it all things related to big finance, what always eventually comes after an absolutely bloated over-value, is a massive crash and over-devaluation.  The Baht is eventually going to crash and when it does it will crash big time - be prepared. 

 

35 minutes ago, rooster59 said:

central bank should “take care” of the currency.

Prestige things are hard to give up. So i think they'll just wait a bit more....

22 minutes ago, AussieBob18 said:

As it all things related to big finance, what always eventually comes after an absolutely bloated over-value, is a massive crash and over-devaluation.  The Baht is eventually going to crash and when it does it will crash big time - be prepared. 

 

Nonsense – just look at the fundamentals 

26 minutes ago, AussieBob18 said:

As it all things related to big finance, what always eventually comes after an absolutely bloated over-value, is a massive crash and over-devaluation.  The Baht is eventually going to crash and when it does it will crash big time - be prepared. 

 

Im not sure many expats will be left or alive to see it!

10 minutes ago, canopus1969 said:

Nonsense – just look at the fundamentals 

 

What fundamentals? Hoarding foreign reserves to window dress the fact the economy is sinking.

You do realise this is a military government and there is no accountability or checks being taken place. They tell us the figures and we have to accept them. There are no proper audits or due diligence taking place

 

The hoarding has a two pronged effect:

1) It allows manipulation for the overseas Thai to gorge on

2) Stops any thoughts of funds shorting the baht. The powers that be are petrified of this as it shows the emperor has no clothes on

 

I'm sure you also agree with the fudged TAT figs, the 99% approval ratings for the junta and the fixed election!

According to the IMF’s real effective exchange rate calculations, which take into account Thailand’s trade flows, the currency’s already well overvalued. It’s at the strongest, by that measure, since its crash in 1997, which triggered the Asian financial crisis.

9 minutes ago, smedly said:

According to the IMF’s real effective exchange rate calculations, which take into account Thailand’s trade flows, the currency’s already well overvalued. It’s at the strongest, by that measure, since its crash in 1997, which triggered the Asian financial crisis.

Avoid the sidewalks, they'll be leaping from the top of hi rises again. ????

Meanwhile Trump suspends duty-free trade on 40 billion baht's worth of Thai goods

Som nam na!

The US & EU should hammer this place like they hammer taxes on our products

27 minutes ago, Sticky Wicket said:

What fundamentals? Hoarding foreign reserves to window dress the fact the economy is sinking.

You do realise this is a military government and there is no accountability or checks being taken place. They tell us the figures and we have to accept them. There are no proper audits or due diligence taking place

 

The hoarding has a two pronged effect:

1) It allows manipulation for the overseas Thai to gorge on

2) Stops any thoughts of funds shorting the baht. The powers that be are petrified of this as it shows the emperor has no clothes on

 

I'm sure you also agree with the fudged TAT figs, the 99% approval ratings for the junta and the fixed election!

What nonsense! 

 

So Thailand successfully develops tourism and exports, for which they get paid in foreign currency and that's supposed to be window dressing!  Then overseas investors decide the Thai economy is attractive and they want to invest in it and that further adds to the foreign currency reserves!

 

THB is strong because of demand, just like any currency strengthens when it is frequently purchased, this has nothing to do with overseas Thai's.

 

THB is not a fully convertible currency, there are limits to the amounts that can be exported or held by overseas banks, that's why foreign funds can't take a position against the currency, it's nothing to do with the foreign currency reserves.

 

 

6 minutes ago, saengd said:

What nonsense! 

 

So Thailand successfully develops tourism and exports, for which they get paid in foreign currency and that's supposed to be window dressing!  Then overseas investors decide the Thai economy is attractive and they want to invest in it and that further adds to the foreign currency reserves!

 

THB is strong because of demand, just like any currency strengthens when it is frequently purchased, this has nothing to do with overseas Thai's.

 

THB is not a fully convertible currency, there are limits to the amounts that can be exported or held by overseas banks, that's why foreign funds can't take a position against the currency, it's nothing to do with the foreign currency reserves.

 

 

You mean hot money from China!

Those dollars should be used for infrastructure etc, not to create an illusion of wealth & stability'

You can still short the baht indirectly using various derivatives

2 hours ago, saengd said:

THB is strong because of demand, just like any currency strengthens when it is frequently purchased

or allowed to be abused

 

the difficulty comes when they decide there is something better to abuse - the sudden exit is not pretty

1 minute ago, Sticky Wicket said:

You mean hot money from China!

Those dollars should be used for infrastructure etc, not to create an illusion of wealth & stability

I mean overseas investors.

 

There's at least 880 bill. of infrastructure projects that have been approved, here's some of them:

 

https://workpermit.co.th/blog/four-major-eec-infrastructure-projects-reviewed/

https://www.pwc.com/th/en/deals/assets/infrastructure-news/Issue9.pdf

How cute, a tag team of no information or knowledge.

4 minutes ago, saengd said:

How cute, a tag team of no information or knowledge.

Just because it is planned, doesn't mean it will get delivered. 

Also they are borrowing and using private capital when they have enough in dollars .

Must be a reason to have such a large amount of dollars on hand?!

46 minutes ago, smedly said:

According to the IMF’s real effective exchange rate calculations, which take into account Thailand’s trade flows, the currency’s already well overvalued. It’s at the strongest, by that measure, since its crash in 1997, which triggered the Asian financial crisis.

Perhaps post a link so we can all see how they arrive at that conclusion?

There are members of the BOT that want to draw down/transfer from the foreign reserves but they are being silenced

Just now, saengd said:

Perhaps post a link so we can all see how they arrive at that conclusion?

Not every post requires links to random web pages!

 

1 minute ago, Sticky Wicket said:

Just because it is planned, doesn't mean it will get delivered. 

Also they are borrowing and using private capital when they have enough in dollars .

Must be a reason to have such a large amount of dollars on hand?!

From your comments on Thai economics thus far I'm not convinced you're actually interested in real answers, instead you just seem to want to bash Thailand, the government and the economy. If that's your agenda then I can just leave you to it, on the off chance you actually do want serious answers I'll try one more time.

 

You complained that instead of holding foreign currency reserves they should spend the money on infrastructure projects. That's not the function of foreign currency reserves which are intended to guarantee trade, the higher the reserves, the more assured trading partners are. Infrastructure build out comes out of a different pot of money and having demonstrated that government has approved a series of them, you now question whether they will get delivered, I guess you'll have to just wait and see on that point since none of us has a crystal ball.

 

As for borrowing et al: it makes sense to borrow when interest rates are low, that's cost effective use of funds. But trying to use the foriegn currency reserves instead of borrowing is a big no no. Previous governements tried to get their hands on that cash when Tarisa was head of BOT and she recieved very healthy support from the most senior people in the country.

9 minutes ago, Sticky Wicket said:

There are members of the BOT that want to draw down/transfer from the foreign reserves but they are being silenced

Quite right too, as mentioned in a subsequent post, it's not permitted under any set of rules.

1 hour ago, canopus1969 said:

Nonsense – just look at the fundamentals 

 

See you in a few years. I will call you 'the fundamentalist'.

26 minutes ago, Sticky Wicket said:

Not every post requires links to random web pages!

 

Well that statement does because it's not true!

 

Below see the link to the July 2019 IMF review of Thailand economics, page 92 states the REER (real exchange rate) is undervalued by between 6-11%!

 

https://www.imf.org/~/media/Files/Publications/ESR/2019/English/ch3.ashx

 

20 minutes ago, saengd said:

Quite right too, as mentioned in a subsequent post, it's not permitted under any set of rules.

Reserves act as a shock absorber against factors that can negatively affect a currency's exchange rate, so a nation's central bank uses its currency reserves to help maintain a steady rate, buying or selling depending on which direction they want exchange prices to go.

 

My point is that this level is being held to conceal the real picture and aid certain Thai people

2 minutes ago, saengd said:

Well that statement does because it's not true!

 

Below see the link to the July 2019 IMF review of Thailand economics, page 92 states the REER (real exchange rate) is undervalued by between 6-11%!

 

https://www.imf.org/~/media/Files/Publications/ESR/2019/English/ch3.ashx

https://forum.thaivisa.com/topic/1130610-imf-calls-for-further-easing-of-monetary-policy-more-govt-spending-amid-slow-growth/?tab=comments#comment-14705027

 

 

Seems like they have changed their minds!!

1 minute ago, Sticky Wicket said:

 

Reserves act as a shock absorber against factors that can negatively affect a currency's exchange rate, so a nation's central bank uses its currency reserves to help maintain a steady rate, buying or selling depending on which direction they want exchange prices to go.

 

My point is that this level is being held to conceal the real picture and aid certain Thai people

That's just one of seven reasons, as you know from the quote.

1 minute ago, Sticky Wicket said:

https://forum.thaivisa.com/topic/1130610-imf-calls-for-further-easing-of-monetary-policy-more-govt-spending-amid-slow-growth/?tab=comments#comment-14705027

 

 

Seems like they have changed their minds!!

Those are two different things. The July review estimates the exchange rate is undervalued, the call for further easing of fiscal policy calls for more spending and lower interest rates.

3 minutes ago, saengd said:

Those are two different things. The July review estimates the exchange rate is undervalued, the call for further easing of fiscal policy calls for more spending and lower interest rates.

And what do lower interest rates do?

Just now, Sticky Wicket said:

And what do lower interest rates do?

lower the cost of borrowing and promote consumer spending and hopefully, slow down the rate of FDI.

saengd is right. The strength of the baht reflects that of the Thai economy. It's super solid now. No sign of a bubble or impending crash either.

 

Though this may not fit the narrative of struggling expats whichever way the baht moves it will do so slowly.

2 hours ago, AussieBob18 said:

As it all things related to big finance, what always eventually comes after an absolutely bloated over-value, is a massive crash and over-devaluation.  The Baht is eventually going to crash and when it does it will crash big time - be prepared. 

 

Wishful thinking fella. Monies continue to pour into the Country purely because its seen as such a safe haven and will continue to do so.