Bank of Thailand explains sudden appreciation of Baht

[saengd]

5 minutes ago, bowerboy said:

 

Google it like your mate SeangD does...it’s not rocket science

You're coming across as all hat and no cattle, just so you know.

[Bjrda77]

8 hours ago, Isaan sailor said:

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.

Putin & Xi are dumping the $US. They don't like the idea that the FED can print the money as much as they please without anything(gold) backing it. But they (Putin&Xi) are still wanting the $ to be around, till they could spend their tons of $ and buy up the world for these paper money and could find ways (gold backed RMB?) to replace the current monetary system. Thailand is not in the position of power to doing so, but we watch it carefully and act accordingly...

Edited January 1, 2020 by Bjrda77

[Tofer]

1 hour ago, bowerboy said:

What about informal lending? That business is not inconsiderable in size in Thailand.

I believe this is now virtually non existent. Since the government outlawed securitisation of private / informal loans, the debtors have simply walked away from their obligations, hence the business no longer functions.

[saengd]

Just now, Tofer said:

I believe this is now virtually non existent. Since the government outlawed securitisation of private / informal loans, the debtors have simply walked away from their obligations, hence the business no longer functions.

I believe he's talking about loan sharks.

[Traubert]

36 minutes ago, bowerboy said:

 

Google it like your mate SeangD does...it’s not rocket science

I don't actually know him so he's hardly a mate.

 

Google is a shining beacon of truth is it? I'll pass thanks.

[bowerboy]

3 minutes ago, Tofer said:

I believe this is now virtually non existent. Since the government outlawed securitisation of private / informal loans, the debtors have simply walked away from their obligations, hence the business no longer functions.

 

Are you joking?

[Tofer]

3 minutes ago, saengd said:

I believe he's talking about loan sharks.

You beat me to it, I was about to edit my post to say, except at the point of a gun.....

[bowerboy]

32 minutes ago, saengd said:

You're coming across as all hat and no cattle, just so you know.

 

Wow..on such an esteemed place as Thai Visa...I feel terrible now

[Tofer]

1 minute ago, bowerboy said:

 

Are you joking?

Nope - fact.

[bowerboy]

Just now, bowerboy said:

 

Wow..on such an esteemed place as Thai Visa...I feel terrible now

 

33 minutes ago, saengd said:

You're coming across as all hat and no cattle, just so you know.

 

And what of your statistics provided with no context? Just statistics with no bearing on reality.

[bowerboy]

39 minutes ago, saengd said:

"What benefit would they gain from setting up manufacturing here? Especially if the trade deal with US is agreed (it will be)".

 

One reason might be that they are outside the line of sight and control of their home government, the same reason that so many Chinese have settled in Thailand and own successful businesses here. We have nothing but Chinese neighbours where we live, many of our friends are Chinese and we socialise with them regularly. These are Chinese who pay large amounts of money to Prem. International school each term for two or three of their young children and they resent the tight control their government has over their lives and their finances.

 

When were you last in the EEC? Do you comprehend the scale of what they are trying to do here? A few private Chinese business is NOT going to move the needle? They need multinational corporations to make this work...and lots of them.

 

for that other poster: Belt and road is to transport goods made in China around the world. NOT to manufacture them around the world.

 

 

[saengd]

7 minutes ago, bowerboy said:

 

 

And what of your statistics provided with no context? Just statistics with no bearing on reality.

Sadly, my statistics and link beats your rhetoric and no supporting proof.

 

Out.

[saengd]

3 minutes ago, bowerboy said:

 

When were you last in the EEC? Do you comprehend the scale of what they are trying to do here? A few private Chinese business is NOT going to move the needle? They need multinational corporations to make this work...and lots of them.

 

for that other poster: Belt and road is to transport goods made in China around the world. NOT to manufacture them around the world.

 

 

You seem overwhelmed by it all, reminds me when they were first building the skytrain in Bangkok in the 1990's and downtown was one big construction site. People at the time expressed similar disbelief to you and said similar, reminds of the saying, build it and they will come.

[MyTHaiMyKe]

The USD is the strongest it ever has been! Thailand is ripping us off! It should be 35+ baht to the US Dollar, not 29.69 to the dollar. Talk about corruption!!!

[saengd]

1 minute ago, MyTHaiMyKe said:

The USD is the strongest it ever has been! Thailand is ripping us off! It should be 35+ baht to the US Dollar, not 29.69 to the dollar. Talk about corruption!!!

I don't think you understand how FOREX works, currently the US Dollar is weak, if it were strong you'd be getting more Baht for your Dollar, not less!

 

https://www.marketwatch.com/investing/index/dxy

[Lingba]

done in the middle of the night on a holiday....

 

[bowerboy]

1 hour ago, saengd said:

I don't think you understand how FOREX works, currently the US Dollar is weak, if it were strong you'd be getting more Baht for your Dollar, not less!

 

https://www.marketwatch.com/investing/index/dxy

 

@saengd what exactly is your agenda in talking utter rubbish? 

 

The USD is trading at or near 5 year highs against most currencies. The USD is strong against all other currencies. Again you are manipulating the information but for what purpose? I find your motivation very odd.

 

If the USD is strong against everything apart from the Baht then it indicates the Baht is strong NOT that the dollar is weak.

 

There is plenty the government could do about it and whilst I do not subscribe to the conspiracy theorists view I do think the government is more than happy to sit back and let it happen for their own personal benefit.

 

An enormous amount of money is being spent in the EEC by the Transport Ministry which is the most “lucrative” ministry. 30% gets skimmed and needs to be sent somewhere safe. Again, not saying it’s a conspiracy but definitely plenty of people happy that the exchange rate is what it is.

 

I really cannot understand your motives in spending so much time in talking utter nonsense (and blatantly obvious nonsense at that) It’s almost like you are paid to be here or something. 

Edited January 1, 2020 by bowerboy
Mistake

[saengd]

2 minutes ago, bowerboy said:

 

@saengd what exactly is your agenda in talking utter rubbish? 

 

The USD is trading at or near 5 year highs against most currencies. The USD is strong against all other currencies. Again you are manually laying the information but for what purpose? I find your motivation very odd.

 

If the USD is strong against everything apart from the Baht then it indicates the Baht is strong NOT that the dollar is weak.

 

There is plenty the government could do about it and whilst I do not subscribe to the conspiracy theorists view I do think they government is more than happy to sit back and let it happen for their own personal benefit.

 

An enormous amount of money is being spent in the EEC by the Transport Ministry which is the most “lucrative” ministry. 30% gets skimmed and needs to be sent somewhere safe. Again, not saying it’s a conspiracy but definitely plenty of people happy it is happening this way.

 

I really cannot understand your motives in spending so much time in talking utter nonsense (and blatantly obvious nonsense at that) It’s almost like you are paid to be here or something. Are you? 

The context is USD/THB and "the sudden appreciation of the Baht", not other currencies. On or around 30th December the USD/THB exchange rate went to 29.84, from in excess of 30, that is the reason for the article in the OP.

 

The reason for that movement was not because THB suddenly strengthened but because USD weakened and the US Dollar Index confirms that, it fell to 96.x and recovered on 31st to 97.x, here is the link once again:

 

https://www.marketwatch.com/investing/index/dxy

 

Now enough!

[passon]

2 hours ago, saengd said:

I'm very happy for us to open up the discussion to related aspects and I mean that sincerely because there's so little opportunity to have such debates on Thaivisa Forum. Most people prefer to simply parrot the idea that government manipulates the currency and not look any deeper. So I'm not going to say you are off topic but I think before we can widen the debate you really should address the original points that you challenged.

 

The topic is "the reason for Baht appreciation" and I've tried to focus on that. I've accounted for the reasons why but you've said that's all Wall Street jargon and doublespeak, I think you need to be clear about what things those are and why, fair enough?

 

There are in all probability a myriad of reasons why the baht has appreciated, and the bottom line is, the baht has appreciated and continues to appreciate, but its appreciation has been painful for many people.  I've read story after story about how those who pull the levers intend to "correct" the problem who quickly dive into forecast, curves, yields, exchanges, valuations, swaps, shorts, and liquidity, which are not specific to any one story, but examples of terms that can be used which in most cases explain nothing to no one because the system is designed to be complicated. In this story it was expressed as, 

 

thin market conditions, which caused an imbalance of FX flows and a spike in volatility. The USD depreciation against regional currencies also contributed to the move. The average reference rate (THBREF) for the day was Bt30.121 to the US$.

 

People aren't searching for jargon, their asking for results.  However such terminology is its own lexicon and might express plausible explanations for the rising baht, but it doesn't mean most people are going to understand it.  There are many terminologies that I understand after two years of economics and the research I conducted on my own before I invested my own money; but, all this jargonistic language doesn't address the effect that currency conditions have on the rest of the economy.  People should not make promises they can't keep. When you promise to mitigate an issue and fail to produce the intended result and then continue to promise to mitigate the issue and continue to produce no results, it then begins to sound like excuses or a tactic to appease and delay.  I don't track the specific stories, there's too many, but I do store pertinent information about performance, and in my opinion there is no equilibrium between a strong [performing] baht and a weak [performing] economy.  One is the enemy of the other.  In the USA I gained almost 17% on my investments through multiple instruments, but I'm well aware that the FED is injecting billions into the market.  Good for me, but bad for the economy.  I think people see all of this as a rigged system, and they would be right.  Therefore the erosion of trust is the result of that pain I mentioned earlier, it is further a result of broken promises to try and fix the system and government always has, is, and always will be the brunt of people's frustration because they are the ones who write laws and govern, and I believe most people think, believe, or know that governments all over the world have a very cozy relationship with banks and corporations, so I first blame the market and the people who manipulate it and those who are complicit in aiding and abetting it.  Is it a crime?  It's a subjective term that can only be defined through definitions of the law.  My intent was to express how the baht effects the marketplace because I was once again reading one more story attempting to convey the "unexpected" rise of the baht and how the problem will be resolved after the new year because it does not represent Thailand's economic fundamentals, but it does not express what those fundamentals are, so it just sounded like more jargon, and more excuses that do nothing for the marketplace as evidenced by its current numbers that I laid out in my first post.  And certainly for me, since I am only a spokesperson for one, excuses really don't pay my bills. 

I think 2020 may experience a massive global correction that will inject more pain for consumers, but that's just my opinion based upon what I read, what I learn and what I believe to be true. Now that part is off topic!          

[saengd]

OK so it sounds as if you don't understand the terminology or maybe you do but would prefer it was made simple. For my part the quote you posted above tells the story and I don't have a problem with it, it actually does describe what happened and why:

 

thin market conditions - there wasn't much action, very few trades, it's the holidays.

imbalance of FX flows - more currency coming in than going out

depreciation against regional currencies - it's not only Thailand it's most of ASEAN countries.

average refrate - the daily BOT exchange rate.

 

If those are the things you call jargon and double speak, all I can say is it's the everyday language of the FOREX market and traders/brokers within it, there's nothing unique about one trade or profession having its own unique vocabulary or dictionary. But just because you don't understand or don't like the terminology, doesn't make the answers incorrect!

 

Let's come to mitigation, the problem is not a simple one and the solution is far from easy, here's some of the potential ways the problem could be solved as I posted elsewhere earlier, perhaps you have constructive ideas you can add:

 

the problem is the floating peg, aka dirty peg, if that was abandoned in favour of a hard peg the problem would be solved immediately. But the memory of 1997 is still very much in people's minds, before then the currency was hard pegged and when the peg was released the currency collapsed, Thailand is unlikely to want to hard peg again.

 

Free float - that risks putting the Baht at the mercy of hedge funds and anyone else that wants to take a position against it and Soros is till a painful memory in Thailand.

 

Sell government bonds only to Thai banks/investors, forbid overseas sales, that would reduce FDI flows and tame the Baht somewhat.

 

A tax on FDI that was repatriated in under 12 months - that would create an offshore and onshore market for THB and still wouldn't really solve the problem but it could reduce inflows.

 

Move to currency swaps, as in the case of China, that would work wonders because it would eliminate exporters having to convert USD into THB....as we speak that move is being embraced more and more but it takes time.

 

 

 

[Isaan sailor]

Well at least now we know BoT lies to us. USD went up 10 satang this morning—and Chinese hot money inflows dragged it down again.

[bowerboy]

1 hour ago, saengd said:

OK so it sounds as if you don't understand the terminology or maybe you do but would prefer it was made simple. For my part the quote you posted above tells the story and I don't have a problem with it, it actually does describe what happened and why:

 

thin market conditions - there wasn't much action, very few trades, it's the holidays.

imbalance of FX flows - more currency coming in than going out

depreciation against regional currencies - it's not only Thailand it's most of ASEAN countries.

average refrate - the daily BOT exchange rate.

 

If those are the things you call jargon and double speak, all I can say is it's the everyday language of the FOREX market and traders/brokers within it, there's nothing unique about one trade or profession having its own unique vocabulary or dictionary. But just because you don't understand or don't like the terminology, doesn't make the answers incorrect!

 

Let's come to mitigation, the problem is not a simple one and the solution is far from easy, here's some of the potential ways the problem could be solved as I posted elsewhere earlier, perhaps you have constructive ideas you can add:

 

the problem is the floating peg, aka dirty peg, if that was abandoned in favour of a hard peg the problem would be solved immediately. But the memory of 1997 is still very much in people's minds, before then the currency was hard pegged and when the peg was released the currency collapsed, Thailand is unlikely to want to hard peg again.

 

Free float - that risks putting the Baht at the mercy of hedge funds and anyone else that wants to take a position against it and Soros is till a painful memory in Thailand.

 

Sell government bonds only to Thai banks/investors, forbid overseas sales, that would reduce FDI flows and tame the Baht somewhat.

 

A tax on FDI that was repatriated in under 12 months - that would create an offshore and onshore market for THB and still wouldn't really solve the problem but it could reduce inflows.

 

Move to currency swaps, as in the case of China, that would work wonders because it would eliminate exporters having to convert USD into THB....as we speak that move is being embraced more and more but it takes time.

 

 

 

 

The Thai Baht IS a free floating currency...if not then please post a reference showing that it isn’t. If you want a reference that it IS free floating just google it and look at the highly reputable publications on the first page of google that state that it is free floating.

 

The Economist, The Diplomat, Bloomberg and others have all done articles on this topic of the strong baht and all come to the same

conclusion....the BOT and Government need to start spending some of those massive foreign exchange reserves and current account surplus. They are so big because they are being managed by dinosaurs with no vision.

[Roy Baht]

19 hours ago, zydeco said:

Right you are. It's 29.72 now.

And now it's back over 30. What a difference a day makes.

https://finance.yahoo.com/quote/THB=X?ltr=1

I think you are overreacting to daily fluctuations.

 

There is definitely downward pressure on the US dollar, due mostly to the “twin deficits” of the federal budget deficit and the current-account deficit. But this pressure might take a while--a year or two--to take effect. https://www.marketwatch.com/story/why-us-dollar-bears-could-be-thwarted-in-2020-2019-12-31

 

In the meantime, a global event--a stock market crash, a war in the Middle East, the bursting of China's housing bubble--might send people running to BUY dollars, as the US currency remains a safe haven in times of crisis. The US dollar’s share of currency reserves worldwide actually rose in the third quarter to its highest level in a year. So people are still buying US dollars, perhaps as a hedge against the kind of global events I mentioned.  https://www.reuters.com/article/forex-reserves/update-1-dollar-share-of-global-currency-reserves-highest-for-a-year-in-q3-imf-idUSL1N295081

 

So next time, before you do your Schadenfreude dance because the US dollar has weakened by a quarter of a baht, you might want to consider other factors.
 

 

[saengd]

6 hours ago, bowerboy said:

 

The Thai Baht IS a free floating currency...if not then please post a reference showing that it isn’t. If you want a reference that it IS free floating just google it and look at the highly reputable publications on the first page of google that state that it is free floating.

 

The Economist, The Diplomat, Bloomberg and others have all done articles on this topic of the strong baht and all come to the same

conclusion....the BOT and Government need to start spending some of those massive foreign exchange reserves and current account surplus. They are so big because they are being managed by dinosaurs with no vision.

BOT operates a managed floating peg which is not the same as a freely floating currency:

https://en.wikipedia.org/wiki/List_of_countries_by_exchange_rate_regime

 

Foreign currency  reserves are not intended to be spent, that's why they are called reserves!

 

I do agree however that the current account surplus should be spent .

 

One more obvious reason for the mitigation list:

 

THB is a closed currency, it is not freely convertible nor available in unlimited amounts worldwide. Making is a freely available currency would reduce the exchange rates but also carries risk that others might take a position against it.

 

Edited January 1, 2020 by saengd

[saengd]

7 hours ago, Isaan sailor said:

Well at least now we know BoT lies to us. USD went up 10 satang this morning—and Chinese hot money inflows dragged it down again.

You keep repeating this nonsense about Chicoms money.....where is it? It's not in the foreign currency reserves, it's not in the budget and there's no bond auctions currently, where is it?

Edited January 1, 2020 by saengd

[mikebell]

On 12/31/2019 at 3:28 PM, Jonathan Fairfield said:

Better market conditions and more balanced flows will resume after the New Year holidays.

And all the Hi-so's have spent their cheap $$$$ and gone back to work.

[MyTHaiMyKe]

11 hours ago, saengd said:

I don't think you understand how FOREX works, currently the US Dollar is weak, if it were strong you'd be getting more Baht for your Dollar, not less!

 

https://www.marketwatch.com/investing/index/dxy

If the dollar is so weak why does everyone in the world want the US dollar? I see everyone in this country, no matter where they come from with the mighty US dollar! I don't see them hoarding the Thai baht or any other currency.

[saengd]

2 minutes ago, MyTHaiMyKe said:

If the dollar is so weak why does everyone in the world want the US dollar? I see everyone in this country, no matter where they come from with the mighty US dollar! I don't see them hoarding the Thai baht or any other currency.

 

To be clear, USD remains strong against most currencies but that's not always the case when compared to THB which has proven last year to be massively strong. 

 

USD is a Reserve currency, it's used extensively globally to settle export bills and the value of many currencies are linked to it. Currencies fluctuate in value, everyone knows that, just because USD drops in value very slightly against THB for 36 hours at month end and over the holidays, doesn't make it a bad currency to hold, it's still a highly regarded currency that everyone wants. 

[Srikcir]

On 12/31/2019 at 3:28 PM, 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

Protect the wealth of the 1%-ers?

Starting with -

• Jan. 10, 2019: "If the economic growth is sharply slower, then the central bank has tools to address it,”
• Feb. 14, 2019: "We are concerned about the baht moving too fast. We're ready to take care of irregular movement,"
• July 9, 2019: "there is no need to quickly adjust its monetary policy, despite expecting lower economic growth this year."
• Nov. 14, 2019: BOT "still has monetary policy space for action to support the economy despite cutting its key interest rate to a record low."
• Nov. 18, 2019: "The strength of Thailand's baht is a concern for the trade-reliant economy which is expected lag the central bank's growth forecast for this year."
• Nov. 19, 2019: "Thailand’s economic outlook is better than what the current slow growth suggests"
• Nov. 25, 2019: BOT says "monetary policy has less room to maneuver, even though the Thai baht has risen beyond its fundamentals"
• Dec. 04, 2019: BOT "remains concerned about the strength of the baht and is ready to take action against any rapid gains"
• Dec. 12, 2019: "the Thai currency would likely be volatile and might not have one-sided gains as seen in the past months."
• Dec. 17, 2019: BOT warns "importers and exporters to brace for a two-way movement of the baht in an attempt to sway market sentiment which heavily bets on continuous appreciation of the Thai currency."
• Dec. 18, 2019: BOT "left its benchmark interest rate unchanged at a record low while it cut its growth forecasts for this year and next"

Ending with -

• Dec. 31, 2019: BOT will closely monitor the market and act as necessary to steer the exchange rate back into line with Thailand’s economic fundamentals.

The real question is - has BOT policies throughout 2019 helped or damaged income inequality?

As PM Prayut pledged to eliminate income inequality, perhaps the Parliament and Cabinet need to look more closely at BOT's monetary policies that appear to exacerbate income inequality.

 

 

 

[saengd]

A couple of things and I hate to keep coming back to the US Dollar Index but it really does hold the answers to so many queries:

 

You posted twelve dates and the BOT concerns on those dates, nine of them were November 2019 onwards.

 

If you look at the US Dollar Index chart (12 month view) you'll see the US Dollar was getting stronger from January until October, thereafter it fell quite sharply, mid October to be precise and that coincides with the BOT statements of concern you have posted.

 

https://www.marketwatch.com/investing/index/dxy

 

Secondly, BOT doesn't make policy, it merely operationalises policy that is set by government.