Central bank panel ready to take more action to deal with rising baht

[Sticky Wicket]

To be fair the country should be swilling in cash. 

If you can't build up reserves in a 3rd world country with cheap labour and no social costs then it's time to pack in!

[saengd]

2 hours ago, davidstipek said:

As you say...

But!

We would have more foreign currency being brought into the Market, Buyers would buy again and Exports here would rise, Shops would have more income.... Thai People would be enabled to buy what, They need and thus the Economy would drastically Improve!!

 

….and for facts for devaluation not working??  I remember when Baht was 40b to 1 USD... people were spending, Economy was on Solid Ground! Exports were Great! Worldwide Thailand was a Leader in Exporting of Goods, even in U.S. Department Store chains had their Personal Buyers here in Thailand! 

 

Who got Greedy here and Manipulating a Change??? Easy, Look which Bank Accounts, Corporation Profits have Increased the most in the last 20 years... This is why the Baht was driven to the level it is now, not by any Economy but by peoples Bank Books!

 

Two ways to improve profits here..

1. Raise Value of Baht and by doing so cut your Exports. Doing so will be amplified as of now. Quantity of orders becoming less and less. Baht is made on single sale / items.

2.lower value of Baht and by thus doing extend export season as Quantity of items sold. Increasing profits, bringing Tourist's back to spend money across the full spectrum of Stores and Shops. Improving everyone Income not just the Elite's!

 

"more foreign currency being brought into the Market, Buyers would buy again and Exports here would rise"

 

And as a result more Thai export bills would have to be paid and that means more USD converted into THB hence yet even more upwards pressure on THB.

 

 

"I remember when Baht was 40b to 1 USD".

 

Getting THB to 40 is not the issue, keeping it there is!

 

 

The only real solution to the problem is to erase the balance of trade surplus, it's that USD 1 bill. per month that's feeding the Foreign Currency Reserves and keeping the currency strong. That in turn is attracting hot money flows and FDI, tourist money is not a factor.

 

[saengd]

10 minutes ago, Sticky Wicket said:

It's actual law

I can believe it might be a law on the Thai books, especially in light of the 1997 crash when the near absence of foreign currency reserves contributed to the crash.

[moutamine]

Leave the Baht alone... I'm paid in Baht and I greatly appreciate the appreciation of the currency!!

[EricTh]

6 hours ago, legend49 said:

Yes ALL talk NO action.

I have been hearing these news over the past few years and yet the Baht has strengthened instead.

[Time to grow]

I have yet to hear any banker, the world over, speak the truth. Odds are, they are doing the diametric opposite of what they speak.

Edited January 8, 2020 by Time to grow
spelling error

[DrTuner]

7 hours ago, ThailandRyan said:

What would the end result be if the government had to devalue the THB?  

They can only do it by printing more money and fiddling with rates, it's not pegged. Forex players would have a field day. Soros must be licking his lips again.

[overherebc]

1 hour ago, Sticky Wicket said:

I was just thinking about all the imported stuff I buy . None of it has gone down in price even though the baht has been super strong for years!

Yep imported baked beans for one. I now count them in the morning, no more than 20 for each breakfast with sausage egg a 2 mushrooms so one can lasts 5 days now not 4.

This story's made up

 Did you guess?

And here's it's message to impress.

Banks make money

So you make less

You work your life

And do your best

End up in debt 

Like all the rest.

And on your tombstone

Neatly lacquered, not just tired

Completely knackered.

Edited January 8, 2020 by overherebc

[saengd]

1 hour ago, DrTuner said:

They can only do it by printing more money and fiddling with rates, it's not pegged. Forex players would have a field day. Soros must be licking his lips again.

The markets and BOT currently agree the Baht exchange rate is appropriate to the strength of the economy, the FOREX markets don't let anyone "fiddle" with the rates.

 

Printing more money........and that does exactly what and how?

[DrTuner]

42 minutes ago, saengd said:

The markets and BOT currently agree the Baht exchange rate is appropriate to the strength of the economy, the FOREX markets don't let anyone "fiddle" with the rates.

 

Printing more money........and that does exactly what and how?

I meant the BOT policy rates, not forex rates. Printing money is the good old QE route. Worked when Helicopter Ben was doing it.

 

[saengd]

11 minutes ago, DrTuner said:

I meant the BOT policy rates, not forex rates. Printing money is the good old QE route. Worked when Helicopter Ben was doing it.

 

The BOT rate was just reduced to an historic low last month, I think they're waiting to see what sort of effect that will have on inflows. The downside to a lower base rate is that consumer lending could increase and this is already at an unhealthy level.

 

What worked for Ben will likely not work for Somchai, BOT doesn't have that many bonds in circulation. That said, the money printing myth is nicley explained here: https://www.investopedia.com/ask/answers/082515/who-decides-when-print-money-us.asp

[yourauntbob]

More Keynesian nonsense.  A strong currency HELPS an economy.  Why would you want your #1 asset to be worth less?  This is like hoping for a housing crash so you can sell more houses.  

[yourauntbob]

5 hours ago, saengd said:

What worked for Ben will likely not work for Somchai, BOT doesn't have that many bonds in circulation.

Petrodollar is the only reason the house of cards is still standing.  but it wont stand forever

[KKr]

16 hours ago, ThailandRyan said:

Here is a real question for all you financial money folks.  What would the end result be if the government had to devalue the THB?  Currency manipulation is definitely happening somewhere along the lines.

https://asia.nikkei.com/Opinion/Thailand-s-problem-Too-much-success?utm_campaign=RN%20Subscriber%20newsletter&utm_medium=opinion_newsletter&utm_source=NAR%20Newsletter&utm_content=article%20link&del_type=6&pub_date=20191228093000&seq_num=20&si=%%user_id%%

Posted this earlier in a similar thread. A good read, may create some understanding of the issue, and also has some recommendations what to do.

Then: 
Currency devaluation is usually a strategy to get an impoverished hard hit currency under control,
not a very common strategy to make something that is in demand cheaper .

Edited January 8, 2020 by KKr
correcting spellchecker

[ThailandRyan]

https://www.bloomberg.com/news/articles/2020-01-08/thailand-s-rising-trade-surplus-with-u-s-exceeds-treasury-limit?in_source=watchlist_news_18

 

As I said earlier, the currency manipulation of the THB, is a concern. So tell me again Saengd, there is no manipulation occurring.  Tell me what happens when they are added to the watchlist by the U.S, as Thailand’s trade surplus with the U.S. has now exceeded $20 billion, raising the chances it will be added to the U.S. Treasury’s watchlist of currency manipulators.

[saengd]

2 hours ago, ThailandRyan said:

https://www.bloomberg.com/news/articles/2020-01-08/thailand-s-rising-trade-surplus-with-u-s-exceeds-treasury-limit?in_source=watchlist_news_18

 

As I said earlier, the currency manipulation of the THB, is a concern. So tell me again Saengd, there is no manipulation occurring.  Tell me what happens when they are added to the watchlist by the U.S, as Thailand’s trade surplus with the U.S. has now exceeded $20 billion, raising the chances it will be added to the U.S. Treasury’s watchlist of currency manipulators.

You say that Thailand is manipulating its currency, I say, tell us how it's done and show us some proof. Trust me when I say I have looked at this issue from every angle I can imagine to try and see how the Baht is being manipulated and there's none that holds water. Every time I ask anyone else to describe how it's done there's never an answer. It's not enough to simply just say, "the Baht is being manipulated by the elites", that's the answer from people who don't know any other answer, don't understand the issue or are too lazy or stupid to think about it, for goodness sake, none of that group is even prepared to take a guess! So come on, if you know, show us the money!

 

The US Watchlist: the spirit of the thing is almost right, it's an attempt to leverage governments into improving their economies by investing more and bigger taking risks except the label is wrong. What the US would like to see is that Thai imports and exports become more balanced and that the trade surplus is erased, that would stop money flowing into the Foreign Currency Reserves and would weaken the Baht, that would get them off the watchlist. But how do they do that?

 

Well, they could remove import tariffs but that would remove any protection for home grown products and business and the government will argue that would increase competition and unemployment and that the country isn't sufficiently developed for those things yet, Thailand is classified as an developing nation. 

 

Option two might be to hard peg the Baht to USD but that was the thing that got them into the financial crisis of 1997 so that's definitely not going to happen.

 

Option three is to invest more into infrastructure to help develop the economy and that's already happening at a significant level but it will take time for the results to be realised - roads and airports are being constructed everywhere, hospitals and schools also. The belt and road investment in the EEC is massive but that's in early days, ditto the high speed train system. So money is being spent by government but they are using private money cheap loans and government bonds rather than Foreign Currency Reserves to finance those initiatives, quite rightly so!

 

Option four, reduce interest rates to zero or similar. The Central Bank interest rate is already at a record low, reducing it further would likely increase consumer debt massively, they need time to see what the effect of the recent cut will be to see if it should be reduced further.

 

Last Option.....make the Baht freely convertible, that would expose it more to external global forces and MAY weaken the currency. But memories of George Soros and 1997 remain strong and frankly, BOT is very nearly there on this issue anyway, I doubt that doing much more on this front would change things.

 

Turning the issue of currency manipulation around for a moment: does Thailand really deserve this title, I mean, it's not as though BOT is out there in the markets every day or every week, actively selling Dollars to buy THB in order to keep the Baht strong, in fact their actions are the exact opposite. Granted, import tariffs and low import levels are 100% a Thai problem that they need to fix at some point but everything else is just market forces at work - remember, it's the global FOREX market, as well as BOT separately, that sets the value of THB every day, it's not something BOT does solely by itself.

 

In defense of why they don't fix that problem: it's important to remember that 20 years ago Thailand was on its knees and 85% of the population was in the poor rural category. Today over 40% are classified as middle class or higher and are economically secure, there's still some way to go before that number reaches an acceptable level and removing import tariffs and destroying Thai industry is not the way to do that,...yet!....at this stage much of Thailand's business at home is not competitive internationally and a lack of quality has much to do with that, as has education. If Thailand does get added to that list and is labeled a currency manipulator, all that will do is to damage the Thai economy further or cause some kind of knee jerk response that the country is not really ready for, perhaps if the US would keep its currency at 100% of the Dollar Index, that would help enormously!!

 

 

 

 

 

Edited January 9, 2020 by saengd

[Henryford]

On 1/8/2020 at 7:47 AM, Sticky Wicket said:

It makes Swiss hotels particularly cheap.

How wonderful

The Swiss Franc is one of the few currencies to hold it's own against the baht.

[KKr]

6 hours ago, ThailandRyan said:

https://www.bloomberg.com/news/articles/2020-01-08/thailand-s-rising-trade-surplus-with-u-s-exceeds-treasury-limit?in_source=watchlist_news_18

 

As I said earlier, the currency manipulation of the THB, is a concern. So tell me again Saengd, there is no manipulation occurring.  Tell me what happens when they are added to the watchlist by the U.S, as Thailand’s trade surplus with the U.S. has now exceeded $20 billion, raising the chances it will be added to the U.S. Treasury’s watchlist of currency manipulators.

a) To create a larger trade surplus, a country would have to lower the value of its currency relative to the USD, and hence create an additional advantage in international trade on top of p.e. low cost of doing business, and low wage advantages. Visa versa, to create a trade deficit, a strong local currency will be an (expensive) tool.
b) to understand why the THB is strong, suggest to read post #74 and the linked article; furthermore Post 76 from @saengd above already laid out some alternative causes of action.
In any case, adding Thailand to a list of manipulators while the currency is appreciating for a longer period of time sounds like a bureaucratic move that has to do with protectionism, not with economic reality.

As for speculation:
Imagine you are a fund manager, then you would get guidelines for risk allocation.
for example, 70 % OECD currencies and 20 % developed countries, 10 % developing nations.
let's say the Fund's overall risk exposure is 10 billion, then the allocation to developing nations would be 1 billion. the Money manager would then seek the best risk/reward proposition, in case he decides that is Thailand, he will sell 1.000 million USD and buy THB, in one form or the other. and in all likelihood he will move the THB exchange rate because the currency is small in terms of international foreign exchange markets.

As for the Trade Surplus with the USA my $ 0.02:
If the uSA were great again as Donald Dump promised, they would have the trade surplus.
Instead of becoming great, that government is resorting to protectionism.
On the long term consequences thereof one can read up.
European people have been fighting for 50 years or so to create an Economic Union of significance.
and despite some power play driven hiccups by politicians who think that a big piece of a cake is more than a slice of a huge pie, in all likelyhood EU will thrive.
(As a side note: that model's precursor in Europe was the BeNeLux where three small countries (Belgium, Netherlands, Luxemburg), in the early 1950's I believe, created something with an Economically critical mass and then extended the proven model to include Germany, France, Italy.)

Edited January 9, 2020 by KKr

[P100]

High savings and lower investment ? Yes of course. Who wants to put money into a corrupt and entirely unpredictable system? Long term investors turn to other countries. It wont get better until they start changing the way of doing govenment business,no more stupid ideas to mess up all but long term policies to create reliability. And rule of law instead of rule of officers.

[DrTuner]

7 hours ago, saengd said:

Well, they could remove import tariffs but that would remove any protection for home grown products and business and the government will argue that would increase competition and unemployment and that the country isn't sufficiently developed for those things yet, Thailand is classified as an developing nation. 

This would be the best option, however once Thais could get their hands on superior quality imports, the market for the locally/Chinese produced <deleted> would instantly die. One can hope, though.

[skorp13]

I know too many regular tourists and ex-pats who are leaving or going else where due to the strong baht. Thai's continue to romance the Chinese and Indian tourists who don't spend any money. So long as the TAT numbers at the airport are up the seem to be happy while many businesses that rely on tourism are suffering

[saengd]

6 minutes ago, skorp13 said:

I know too many regular tourists and ex-pats who are leaving or going else where due to the strong baht. Thai's continue to romance the Chinese and Indian tourists who don't spend any money. So long as the TAT numbers at the airport are up the seem to be happy while many businesses that rely on tourism are suffering

More hearsay/I think/I was told/know one person.

[Isaan sailor]

Sorry to say, I still see an inverse relationship of USD and Chinese Yuan on an almost daily basis.  So I don’t believe a fund manager in the West keeps buying Thai bonds.  It would only happen by coincidence.  More likely a money manager in Beijing buys those Thai bonds.

[saengd]

39 minutes ago, Isaan sailor said:

Sorry to say, I still see an inverse relationship of USD and Chinese Yuan on an almost daily basis.  So I don’t believe a fund manager in the West keeps buying Thai bonds.  It would only happen by coincidence.  More likely a money manager in Beijing buys those Thai bonds.

What Thai bonds, from where, there has been no bond sales for over two months and there is no secondary market!

Edited January 9, 2020 by saengd

[Sonhia]

The country is in a finacial mess and has been for decades.

 

What makes Thailand, a third world so called progressive (joke) country think it is in good form when first world countries are struggling!?

 

Typical Thai mind-set. 

 

[saengd]

4 minutes ago, Sonhia said:

The country is in a finacial mess and has been for decades.

 

What makes Thailand, a third world so called progressive (joke) country think it is in good form when first world countries are struggling!?

 

Typical Thai mind-set. 

 

What you understand about Thailand and its economy is nothing whatsoever!

 

Far from being a mess its economy is the envy of most countries.

And Thailand is not a third world country, that term refers to political alignment during the cold war, it is however classified as developing!

 

You should do some reading rather than spouting nonsense.

 

 

 

[ttrd]

On 1/7/2020 at 9:48 PM, daveAustin said:

Well done, but watch you don't get rapped by the Americans in the name of 'currency manipulation'. ???? 

The USD influence may soon be history ...

 

https://www.eastasiaforum.org/2019/07/30/should-asia-have-a-regional-currency/

[DrTuner]

5 hours ago, ttrd said:

The USD influence may soon be history ...

 

https://www.eastasiaforum.org/2019/07/30/should-asia-have-a-regional-currency/

Renmimbi will soon be the universal currency here among the colonies.

[timewilltell]

Strikes me the first thing they should do is remove or greatly increase the allowance on moving currency out of the country. It is absurd that they are moaning about the Thai baht being strong while doing all they can to stop anyone selling it to send it back home.

 

I gave up trying to find logic anywhere in Thailand and especially among those in power a very long time ago.

[saengd]

38 minutes ago, timewilltell said:

Strikes me the first thing they should do is remove or greatly increase the allowance on moving currency out of the country. It is absurd that they are moaning about the Thai baht being strong while doing all they can to stop anyone selling it to send it back home.

 

I gave up trying to find logic anywhere in Thailand and especially among those in power a very long time ago.

That allowance has just been increased quite substantially but it's not clear to me that it's available to foreigners also! Thai's however can now pretty much do what they please when it comes to buying overseas property or investments etc.

Edited January 10, 2020 by saengd