Bank of Thailand explains sudden appreciation of Baht

[ThaiBrian]

Someone told me some 80% of all Thais are in debt? How has the thai economy not imploded? 

12 hours ago, chowny77 said:

I am just waiting for the baht to explode as too many people are already in debt and the housing building boom is out of control. Possibly a re-occurrence of 1997. No way the banks can talk their way out of obviously making the baht strong with no financial backing.

 

[englishoak]

Surprised they didnt blame Brexit or Trump tbh. 

[saengd]

11 hours ago, sfokevin said:

So it is not possible for the BOT to control a know interday fluctuation like this?... Isn't this what they are chartered to be doing... Provide a stable currency?

 

BOT has two roles when it comes to managing the exchange rate:

 

- manage the value of the Baht within a range, against USD, for the benefit of Thai exporters, and

- manage the value of the Baht within a range, against a basket of ASEAN currencies, as required by ASEAN membership.

 

I doubt BOT will want to tweak the value of the Baht every time USD twitches, as long as THB remains within the range. And as others have already pointed out, the value will adjust anyway at month end as large recurring deposits/transactions take place.

[saengd]

1 hour ago, ThaiBrian said:

Someone told me some 80% of all Thais are in debt? How has the thai economy not imploded? 

 

Thailand's household debt is around 80% of GDP, that means the population owes in debt almost 80% of what the country makes as a whole per year. But that number is not unusually high when it comes to household borrowings/debt, in the UK for example the number is over 92% of GDP and GDP in the UK is far higher than in Thailand....in the US it is 106%!

 

Having that level of debt of not a problem as long as it can be serviced and households can repay it to the banks. A better number to watch if you're nervous about the debt is the rate of Non-Performing Loans (NPL's), this is debt that customers have defaulted on and cannot repay, in Thailand currently that percentage is about 3% which is considered normal.

[saengd]

11 hours ago, Mango Bob said:

It also seems to dip every Friday which of course stays until the following Monday.

The Friday dip is as a result of dealers squaring their positions in advance of the weekend, they are reducing the risk of a an exchange rate swing over the weekend when they are unable to deal. https://www.investopedia.com/terms/s/square-position.asp

[Sticky Wicket]

14 hours ago, saengd said:

How exactly do the big hedge funds manipulate or take a position against a restricted currency that is not fully convertible and one that overseas banks are only allowed to hold in limited amounts?

Restricted, not fully convertible , limited amounts

Sounds like the BOT have enough bullets in the chamber to massage the rates to Palpatine's desire.

[saengd]

2 minutes ago, Sticky Wicket said:

Restricted, not fully convertible , limited amounts

Sounds like the BOT have enough bullets in the chamber to massage the rates to Palpatine's desire.

Yes, but, if Thailand were to make their currency freely convertible they would be in a similar position to pre-1997 and would be susceptible to overseas hedge funds and other financial entities taking a position against the Baht in order to make a profit. Even today many Thai people still blame George Soros for crashing THB rather than the poor currency management and overseas borrowings so opening up THB will be a very slow affair.  

[RichardColeman]

15 hours ago, Jonathan Fairfield said:

The BOT will closely monitor the market and act as necessary to steer the exchange rate back into line with Thailand’s economic fundamentals.

Support the rich, cream the poor with loans, destroy exports and continue to spout same tripe

[saengd]

Talking of tripe!

[Marpa47]

14 hours ago, AussieBob18 said:

the longer it takes to adjust - the harder will be the adjustment. 

Same goes for most currencies.  Lot of chatter online about it.  Race to the bottom.  Hope the talking heads are wrong.  

[zydeco]

9 hours ago, EricTh said:

29.75 is not low enough.

Right you are. It's 29.72 now.

[Yadon Toploy]

15 hours ago, JAG said:

There is another equally fictional scenario. A government  (let us not comment on the manner of it's election) is beholden to and overwhelmingly governing in the interests of a very small but extremely wealthy section of the population.  This section  of the population has many property interests,  investments, funds and expenses (education for example) to be met in other countries, particularly "developed" western countries. A strong Baht is very much in their interests, and their interests overule other economic factors...

Getting warm...

[passon]

Here is where the rubber meets the road.  You can make excuses, you can exercise theory until your excuses and theories are as they began, useless jargon that produce negative results,  simply because they don't get to the heart of how an inflated baht impacts the Thai economy.

There are a few bloggers here that like to regurgitate Wall Street labels as if they actually meant something.  Put ten economist in one room and ask them one question and you'll most likely get ten different theories.  I think what a lot of people here are trying to say is that they don't trust the people who pull the levers in government, banks, or corporations because generally speaking all they do is try to cover their assets [dual meaning, pun intended].

Forget the theories and speculations and wall street doublespeak; again, it is useless information, and propaganda designed to ignore reality.  Reality is in the manufacturing sector that produced 1.2%, 2.5%, and 4.3% less in the first, second, and third quarters respectively in 2019.

Capacity utilization of factories has plummeted from 69.9% usage in 2018 to 63.7% in October, 2019.

The Private Investment Indicator shrunk by 1.0% in the first quarter of 2019, contracted by a further 3.2% in the second quarter of the same year, and 3.1% in the third quarter, and this trend of investment growth does not indicate economic growth year on year.

67 consecutive quarters of lower consumer confidence, increased cost for goods and services, factory closings or factories up for sale, and companies such as Mazda considering moving their operations back to Japan are not attributable economic conditions for growth.

Here is what I know, baht appreciation and a higher cost of living means to me, and I think many others that I will postpone big purchase decisions, buy less and do less when it comes to things like indulging in pleasures, movies, Starbucks, dining, tourism, etc...

You can call baht appreciation anything you want; you can make all the excuses you want and attempt to dazzle anyone you want, but at some point "there is a good possibility that a crisis could occur in the production market because there are clear signs of production market struggles as the sector keeps producing fewer goods and services which would likely effect the financial labor markets."  So at some point making excuses for a strong baht that has an impact on the markets is nothing more than a shell game, but it does not change the lack of production and consumption; so, again, for me personally, I only spend when I have to and that's how I survive, and that's how I fight back against a dominant currency, and I don't give two cents about anyone making excuses for its strength.  Excuses don't pay my bills.

[sungod]

18 hours ago, Maverell said:

It certainly looks that way, its the same of course with the THB/GBP rate. Perhaps some one who knows about these things can enlighten us?

I cant enlighten you, but would suggest if this is a pattern that you do your transfers when suits best!

[evadgib]

19 hours ago, MeePeeMai said:

Why does the THB to USD always seem to dip at the end/beginning of the month right about the time I transfer my monthly pension to my bank here?  Is this a deliberate action (I wonder)?

I have long suspected this to be the case.

[Lodestone]

36 minutes ago, zydeco said:

Who are the financial nitwits out there that laugh off an eight percent reduction in their purchasing power? Only "penniless pensioners that moan?" Here is some news for the uninitiated: millionaires and billionaires didn't get that way by dismissing an eight percent haircut to their earnings, interest rates, investments, or exchange rates. 

No, what they do instead of the "moaning penniless pensioners" is take responsibility for their own decisions that caused that return and put their money somewhere else (e.g. the Philippine peso has been at about 50/USD for the last three years). That is, in fact, how you become rich on your own: by realizing and correcting your own mistakes instead of forever moaning and blaming some phantom conspiracies.

[spidermike007]

A good friend of mine, who knows a Thai centi millionaire who owns a large hotel, and some other properties, said it was due to either the private banks, or the Bank of Thailand taking well over a trillion dollars in deposit from the Chicoms, in exchange for a high interest rate. Apparently top secret stuff. Makes alot of sense for the Chinese, and how would the army have the vision to say no to something like this? The Thai banking system is very stable, and the Chinese want an additional foothold into Thailand for manufacturing. 

 

If you think about all of the fundamentals in the Thai marketplace, and economy, and look at the decimated state of Thai tourism (massive numbers of low quality tourists do not mean much to the millions dependent on tourism for a living), if kind of makes sense. What else is propping up the baht? Exports are down, manufacturing is down, slow growth, and poorly mismanaged economy, tourism income and bookings are way down, and there are not enough foreign inflows coming into the markets to justify the level of the baht. 

Edited January 1, 2020 by spidermike007

[Isaan sailor]

As a chartist and former currency trader, I look at patterns.  USD down, as well as paired western currencies.  Chinese Yuan up—by similar patterns in reverse.

A concerted effort to achieve this result is obvious.  The questions remain: who allowed this, and why?  I would start at Bank of Thailand for answers.

[30la]

Now we know, nothing is being done yet, it's not the right time!

[fruitman]

20 hours ago, MeePeeMai said:

Why does the THB to USD always seem to dip at the end/beginning of the month right about the time I transfer my monthly pension to my bank here?  Is this a deliberate action (I wonder)?

That's because the options expire...also at the end of the year some folks have to/want to show their yearly balances to their investors/bosses so they can buy/dump a lot of currency....

 

I'm no specialist but have been trading currency for a while and there are certain periods of the year when markets move fast or slow....traders all know that. Same for you, if you notice fluctuations at the end of the month when they all get salaries you better change it 2 weeks later.

 

We also don't go to the BKK malls at the end of the month when they all have money because it's far too busy.

[fulhamster]

Perhaps the monthly overseas payments are due on the 1st ??

 

[30la]

1 hour ago, evadgib said:

I have long suspected this to be the case.

I wrote it a few weeks ago, and for months now he has been moving like this, in my opinion provoked, someone wants the espats to return to their home country!

[fruitman]

8 minutes ago, 30la said:

I wrote it a few weeks ago, and for months now he has been moving like this, in my opinion provoked, someone wants the espats to return to their home country!

He is right that markets are thin between christmas and newyear because the traders are all on holiday.

 

But that's also an excellent moment for guys like him to sell the baht down because there are not many buyers.

 

He really lost face that NOTHING is happening with the strong baht, no matter what he says or does it just doesn't go down. I would replace this guy.

 

 

[ftpjtm]

The best way to lower Baht strength is to reduce Thai Central Bank interest rates and they failed to do that on Dec 18th, so this shouldn't be much of a surprise.

[zydeco]

1 hour ago, Lodestone said:

No, what they do instead of the "moaning penniless pensioners" is take responsibility for their own decisions that caused that return and put their money somewhere else (e.g. the Philippine peso has been at about 50/USD for the last three years). That is, in fact, how you become rich on your own: by realizing and correcting your own mistakes instead of forever moaning and blaming some phantom conspiracies.

Sure. Love how the billionaire bankers took "responsibility for their own decisions" back in 2008, with government bailouts and the Fed spraying liquidity through a firehouse to help them for the next 11 years.

[new2here]

12 hours ago, Lodestone said:

No, not at all. Every nationality that works in Thailand, earns a salary in Thai baht, and regularly wires some amount of their salary out of Thailand, is actually benefiting from this. And this is not a small group -- undoubtedly much larger than the number of moaning penniless pensioners that post on ThaiVisa.com

I pulled the trigger and exchanged a chunk of my THB I’ve had essentially parked here for a while, into USDs and got exactly 30.00 ..... so, while the most recent move isn’t going to radically change my financial picture on a long term basis, it did give me a real boost in the short term over the low/mid 30s I’ve seen as if late.

 

i agree that while we hear quite a lot about the pain and suffering of those foreigners on the buying THB side (and I agree it IS painful at the moment) of the market..... I agree that there’s also a fair number of foreigners who are on the other side of this trade, and my be selling their THBs and enjoying a temporary boost in returns. 
 

so it’s not all bad news... just depends on what side you’re on at the moment and which way the rates happen to favor.

[Traubert]

19 hours ago, saengd said:

Not bad, let's make another completely fictional scenario:

 

A group of foreigners get together to have a group whinge about the overly strong local currency and complain about how it is interfering with the number of bottles of Chang they can buy at the 7/11. To mask their complete lack of understanding of how economics and FOREX works they agree over time that the government is corrupt and is manipulating the currency for their own ends and that everyone including the Central Bank is on on the act. When asked to provide proof of their claim the group replies, yada yada yada yackety yada....when presented with evidence their claim cannot possibly be correct the group responds with yada yackety yada yada yackety yada. All theoretical conjecture of course but with oodles of factual information to back it up.

I like this, it sounds very familiar. Is it like those Hollywood noise pollution things they call 'mooviez' that are 'based on a true story?' ????

[metisdead]

Some troll posts have been removed. 

[hotchilli]

21 hours ago, MeePeeMai said:

Why does the THB to USD always seem to dip at the end/beginning of the month right about the time I transfer my monthly pension to my bank here?  Is this a deliberate action (I wonder)?

This year they'll be trying to correct that, working hard to make sure all the days in-between are the just as low!

 

[saengd]

2 hours ago, passon said:

Here is where the rubber meets the road.  You can make excuses, you can exercise theory until your excuses and theories are as they began, useless jargon that produce negative results,  simply because they don't get to the heart of how an inflated baht impacts the Thai economy.

There are a few bloggers here that like to regurgitate Wall Street labels as if they actually meant something.  Put ten economist in one room and ask them one question and you'll most likely get ten different theories.  I think what a lot of people here are trying to say is that they don't trust the people who pull the levers in government, banks, or corporations because generally speaking all they do is try to cover their assets [dual meaning, pun intended].

Forget the theories and speculations and wall street doublespeak; again, it is useless information, and propaganda designed to ignore reality.  Reality is in the manufacturing sector that produced 1.2%, 2.5%, and 4.3% less in the first, second, and third quarters respectively in 2019.

Capacity utilization of factories has plummeted from 69.9% usage in 2018 to 63.7% in October, 2019.

The Private Investment Indicator shrunk by 1.0% in the first quarter of 2019, contracted by a further 3.2% in the second quarter of the same year, and 3.1% in the third quarter, and this trend of investment growth does not indicate economic growth year on year.

67 consecutive quarters of lower consumer confidence, increased cost for goods and services, factory closings or factories up for sale, and companies such as Mazda considering moving their operations back to Japan are not attributable economic conditions for growth.

Here is what I know, baht appreciation and a higher cost of living means to me, and I think many others that I will postpone big purchase decisions, buy less and do less when it comes to things like indulging in pleasures, movies, Starbucks, dining, tourism, etc...

You can call baht appreciation anything you want; you can make all the excuses you want and attempt to dazzle anyone you want, but at some point "there is a good possibility that a crisis could occur in the production market because there are clear signs of production market struggles as the sector keeps producing fewer goods and services which would likely effect the financial labor markets."  So at some point making excuses for a strong baht that has an impact on the markets is nothing more than a shell game, but it does not change the lack of production and consumption; so, again, for me personally, I only spend when I have to and that's how I survive, and that's how I fight back against a dominant currency, and I don't give two cents about anyone making excuses for its strength.  Excuses don't pay my bills.

You use the word "excuses" several times to describe some of the things that have been said about the strength of THB yet you haven't really offered up an alternate "excuse", instead you've focussed on declining manufacturing and the effect an overly strong baht has on your spending habits, none of which has much to do with the sudden increase of THB......the question is, which debate are you trying to have?

 

If your debate is about WHY THB is strong there's not much more to be said that hasn't been said many times already, trade surplus, Dollar weakness, floating peg...end of.

 

But if your chosen debate is about productivity losses then we have to remind that Thailand is more of an assembler than a manufacturer, it is a link in the chain rather than the entire chain. So because the China/US trade war erupted and badly hit the automotive industry, and because the move is now away from assembling multi-component gasoline based cars to the much less complex and less labour intensive electrically driven cars, yes, manufacturing is suffering and factory utilisation and productivity are down......and?

 

As for your spending habits: core CPI is very nearly flat, that is part of the problem, if you're spending is getting hurt as a result of the Thai economy perhaps you are buying the wrong things!

 

So, given the title of this thread is the sudden appreciation of the Baht, which debate do you want to have, the thread subject, manufacturing decline or the effects of an overly strong Baht?

 

Edited January 1, 2020 by saengd