Baht keeps strength despite coronavirus outbreak, economic decline

[earlinclaifornia]

0.0319 June 6, 2019  0.0318 today

[BestB]

6 hours ago, NCC1701A said:

36 to the USD is the best you can hope for sometime in the next 5 years. 

 

that is it. then a return to maybe as low as 25 to the USD.

 

sometime after 2040 the Thai Baht will be the new global safe haven currency and the economic powerhouse of the entire world. everyone will speak Thai. Cities all over the world will be plunged into darkness but Bangkok will be the engine of the world.   

Have you been hanging around with big P again?????

[saengd]

23 minutes ago, Kenny202 said:

What do u see happening in the future? I have no clue about cuurencies but the baht over the years has been very high and very low. Is there any chance it will devalue in the foreseeable future and what events would be needed to turn it around and decline? Surely exports must be slowing down with Thailand being uncompetive exchange wise and the general slow down in the world economy

I think we may see a slight drop in the value of the Baht, no more than 6% or so but of course nobody has a crystal ball so this is just an educated guess. As already said there are lots of large scale external factors in play, each of them could cause upset and any combination of them, if they came out together on the downside, could cause large problems, the flu, exports, the drought, the trade war, global recession, Trump unknowns, etc etc.

 

Large scale devaluation I think is very unlikely since that would not solve the underlying problems which is a current account and trade surplus, devaluation would simply give overseas buyers more Baht for their Pound or Dollar so capital inflows would increase. Solving the trade surplus would need a serious increase in imports and I don't see that happening. Exports have been on an upward trend for several years and reached a peak lat July, they are now down from that peak of USD 22.5 billion, down to 19 bill, that's still a seriously respectable number. Tourist numbers have fallen of course but as soon as this flu business is over, tourism will recover so the estimate of 3% GDP for the end of next year is entirely possible, I think.

 

So in a nutshell, a decline in value of THB needs an increase in imports and/or a serious decline in exports and the current account surplus to be eliminated or made more reasonable. 

 

 

[ivor bigun]

After reading all the informed opinion on here and weighing it all up ,i have come to the conclusion that A /the baht will go down B/ the baht will go up or C/ it will stay the same 

dont say i didnt warn you . 

[baansgr]

6 hours ago, saengd said:

I agree with the first part of your post, the jury is out on the rest of it however. 

The baht is due for a massive collapse. No signs, no signals, no slowly slowly, just a drop overnight, and quite soon also. Tom yam gung with extra fish sauce and chilli

Edited February 20, 2020 by baansgr

[saengd]

Sorry, forgot to add....I'm very much in the camp that says USD/THB will head towards 25 over the next decade, I just don't believe for one second it's going the other way. And since GBP/USD is based almost solely on USD/THB, I'm expecting low to mid 30's for the Pound over that same period.

[saengd]

6 minutes ago, baansgr said:

The baht is due for a massive collapse. No signs, no signals, no slowly slowly, just a drop overnight, and quite soon also

How, why? Will they remove the managed peg to USD, will BOT make the Baht fully convertible, because that's what would need to happen for your idea to come true. Most people don't really understand why THB is strong, if they don't know that they can't possibly know what will weaken it.

Edited February 20, 2020 by saengd

[baansgr]

3 minutes ago, saengd said:

How, why? Will they remove the floating peg, will BOT make the Baht fully convertible, because that's what would need to happen for your idea to come true. Most people don't really understand why THB is strong, if they don't know that they can't possibly know what will weaken it.

Why is THB so strong?

[saengd]

11 minutes ago, baansgr said:

Why is THB so strong?

Current account and trade surplus, exports are far higher than imports.

Foreign Currency Reserves of over USD 220 billion.

Low government debt, only 40% of GDP, hardly any overseas borrowings.

Low unemployment, readily available workforce, negligible social security overheads.

 

EDIT TO ADD:

 

The Baht is not fully convertible, it cannot be exported in large amounts, this means that BOT has total control of its value, outsiders cannot take a position (for delivery) against the Baht and manipulate its value. AND it only takes a fairly small amount to move the Baht one way or the other because it is such a small currency.

 

One other scenario that could cause THB to crash: if the Japanese car companies pulled out of Thailand and sold all their massive highly leveraged assets and repatriated them, they wouldn't sell Baht for YEN, why would they, they'd sell for USD.

Edited February 20, 2020 by saengd

[onebir]

7 hours ago, phkauf said:

The only reasonable explanations for the baht's strength at this point I can think of are:

- as the article mentioned imports are down relative to exports, which keeps the current account surplus high. This is very important so as not to repeat a 1997 type crash. But it also signals something VERY ominous - the economy is slowing dramatically and could fall into a recession.

- the cross currency flows ($ to baht, etc) are not significant enough to push the rate down at this point. In other words, Thailand just doesn't matter much compared to other major currencies. The Baht is definitely not a safe haven currency, but it is stable enough not to panic sell at the moment.

Whatever the reason, I just don't see how the baht can stay this high for very long. 

Also profit taking on gold, which apparently is get converted into baht and repatriated:

https://www.reuters.com/article/us-thailand-economy-gold/gold-a-new-headache-for-thai-central-bank-as-baht-surges-idUSKBN1WQ170

If gold strengthens further, that's likely to increase (at least until weak hands are empty).

 

So 6m to a year out there could be a baht double whammy from a recession (hinted at by import weakness) & gold sales ebbing (depending on the path of gold prices, Thai holdings etc). A significant weakening (+ the economic effects of coronavirus on China & likely Asia) could also take the shine off the baht's safe haven status.

[saengd]

Just now, onebir said:

Also profit taking on gold, which apparently is get converted into baht and repatriated:

https://www.reuters.com/article/us-thailand-economy-gold/gold-a-new-headache-for-thai-central-bank-as-baht-surges-idUSKBN1WQ170

If gold strengthens further, that's likely to increase (at least until weak hands are empty).

 

So 6m to a year out there could be a baht double whammy from a recession (hinted at by import weakness) & gold sales ebbing (depending on the path of gold prices, Thai holdings etc). A significant weakening (+ the economic effects of coronavirus on China & likely Asia) could also take the shine off the baht's safe haven status.

Yes, the gold aspect is worth mentioning but not for the reason you suggest.

 

Thai gold sales have increased substantially and it has risen in value, BOT seems to be a large buyer and I think that's how they are trying to manage the value of THB downwards by selling baht and buying gold, that makes a lot of sense.

 

But you mention repatriation of profits and the impact of that on the Baht. Thai gold would not logically or sensibly be purchased using USD, why would it, neither China nor Thailand want to spend USD for that purpose. So sensibly, those purchases of gold would be made by selling THB, they certainly would in the case of domestic gold purchases, the impact of those purchases is already embodied in today's value of THB. But when it comes time to sell the gold it would logically be sold for THB once again and that will cause the value of THB to rise further. 

 

 

[Kenny202]

1 hour ago, saengd said:

Current account and trade surplus, exports are far higher than imports.

Foreign Currency Reserves of over USD 220 billion.

Low government debt, only 40% of GDP, hardly any overseas borrowings.

Low unemployment, readily available workforce, negligible social security overheads.

 

EDIT TO ADD:

 

The Baht is not fully convertible, it cannot be exported in large amounts, this means that BOT has total control of its value, outsiders cannot take a position (for delivery) against the Baht and manipulate its value. AND it only takes a fairly small amount to move the Baht one way or the other because it is such a small currency.

 

One other scenario that could cause THB to crash: if the Japanese car companies pulled out of Thailand and sold all their massive highly leveraged assets and repatriated them, they wouldn't sell Baht for YEN, why would they, they'd sell for USD.

This is where I get lost. Where are all these cash reserves? I live up country and everyone is skint including highly paid people who are so much in debt they have little to live on after paying monthly debts. Any ill gotten gains are kept under the bed or invested in yet more untenanted shop houses. Car sales are down all over the world and already some of the car companies scaling down particularly domestically. Unemployment has to be rising with reports of factory closures and scale downs everyday. Chev put 1000 people out of work yesterday. Low government debt? Another thing I don't understand. Some of the wealthiest people here government workers, teachers. Where does this money come from? I don't see too many small business operators here paying tax nor does the government seem to be interested in pursuing it. If there is a huge surplus of cash it must be distributed amongst a very small portion of the population. What does foreign currency reserves mean? Is this foreign currency the government has or individuals? I don't doubt what is being said, it just doesn't seem to add up.

 

Thailand is all about export, manufacturing, tourism and agriculture. These are all down the toilet and will only get worse snowball effects higher unemployed, lower disposable income per person. It seems like the perfect storm to me but in the land of opposites it does appear that even though everything is actually in the toilet and the average Thai is hurting, the country is doing well ????????

[saengd]

3 minutes ago, Kenny202 said:

This is where I get lost. Where are all these cash reserves? I live up country and everyone is skint including highly paid people who are so much in debt they have little to live on after paying monthly debts. Any ill gotten gains are kept under the bed or invested in yet more untenanted shop houses. Car sales are down all over the world and already some of the car companies scaling down particularly domestically. Unemployment has to be rising with reports of factory closures and scale downs everyday. Chev put 1000 people out of work yesterday. Low government debt? Another thing I don't understand. Some of the wealthiest people here government workers, teachers. Where does this money come from? I don't see too many small business operators here paying tax nor does the government seem to be interested in pursuing it. If there is a huge surplus of cash it must be distributed amongst a very small portion of the population. What does foreign currency reserves mean? Is this foreign currency the government has or individuals? I don't doubt what is being said, it just doesn't seem to add up.

 

Thailand is all about export, manufacturing, tourism and agriculture. These are all down the toilet and will only get worse snowball effects higher unemployed, lower disposable income per person. It seems like the perfect storm to me but in the land of opposites it does appear that even though everything is actually in the toilet and the average Thai is hurting, the country is doing well ????????

Let me try to give you a simple example, if I can, mostly because it takes too long to give you a detailed picture.

 

Budget Surplus/Deficit and Debt.

 

People and business pay tax every year, government then makes a budget for the following year showing how that money will be spent. The budget gets approved and the budgeted money is distributed to the government departments to spend on various "stuff", education, medical, social security, all the every day stuff that keeps the country running.

 

At the end of the year the government adds up the numbers and finds out that it is either over budget or under, it spent too much or it has some left over.  If it has spent too much that's known as a budget deficit and it is classified as debt, money is then borrowed to pay for that debt either by issuing bonds or similar. that's what is low, government debt.

 

Trade Surplus and Foreign Currency Reserves.

 

Meanwhile, exporters are exporting "stuff: overseas and importers are importing "stuff" from overseas also, the difference between the two, imports and exports, is known as the balance of trade. Just like the budget described previously, if we import more than we export that's a trade deficit, but if we export more than we import that's a trade surplus. That means we've earned more from exports than we've paid for imports so there's a trade surplus and the current account (the trading bank account) is in credit. BUT, before we can trade we need to demonstrate to our trading partners that we can pay their bills for whatever we import, that's where the foreign currency reserves come in because they demonstrate to the world that our credit is good. So at the end of each month we settle all the trading bills and the foreign currency we earned from exporting "stuff" gets banked by the exporters, but first that foreign currency gets sold to the Bank of Thailand who exchange it for Baht, pay the exporter and put the foreign currency into the foreign currency reserves. Slowly but surely the foreign currency reserves grow, USD 220 Bill. at last look, it's not money that is used for anything apart from guaranteeing trade and managing the value of the Baht, The Bank of Thailand is the keeper of that money, government cannot get its hands on it. That money is held in 24 foreign currencies plus THB and gold, that means we can easily pay trade bills from almost any country, plus.

 

Tax

 

Taxes: only about 4% of the population pays taxes through a PAYE system, the rest, the vast majority pay on the basis of an annual tax return. In total only about 10 million people pay tax but that number is growing fast, the majority of tax income comes from big business. There are lots of low earners in the system who don't make enough to pay tax.

 

I hope that makes sense to you, if it doesn't feel free to ask away.

 

 

 

[Kenny202]

19 minutes ago, saengd said:

Let me try to give you a simple example, if I can, mostly because it takes too long to give you a detailed picture.

 

Budget Surplus/Deficit and Debt.

 

People and business pay tax every year, government then makes a budget for the following year showing how that money will be spent. The budget gets approved and the budgeted money is distributed to the government departments to spend on various "stuff", education, medical, social security, all the every day stuff that keeps the country running.

 

At the end of the year the government adds up the numbers and finds out that it is either over budget or under, it spent too much or it has some left over.  If it has spent too much that's known as a budget deficit and it is classified as debt, money is then borrowed to pay for that debt either by issuing bonds or similar. that's what is low, government debt.

 

Trade Surplus and Foreign Currency Reserves.

 

Meanwhile, exporters are exporting "stuff: overseas and importers are importing "stuff" from overseas also, the difference between the two, imports and exports, is known as the balance of trade. Just like the budget described previously, if we import more than we export that's a trade deficit, but if we export more than we import that's a trade surplus. That means we've earned more from exports than we've paid for imports so there's a trade surplus and the current account (the trading bank account) is in credit. BUT, before we can trade we need to demonstrate to our trading partners that we can pay their bills for whatever we import, that's where the foreign currency reserves come in because they demonstrate to the world that our credit is good. So at the end of each month we settle all the trading bills and the foreign currency we earned from exporting "stuff" gets banked by the exporters, but first that foreign currency gets sold to the Bank of Thailand who exchange it for Baht, pay the exporter and put the foreign currency into the foreign currency reserves. Slowly but surely the foreign currency reserves grow, USD 220 Bill. at last look, it's not money that is used for anything apart from guaranteeing trade and managing the value of the Baht, The Bank of Thailand is the keeper of that money, government cannot get its hands on it. That money is held in 24 foreign currencies plus THB and gold, that means we can easily pay trade bills from almost any country, plus.

 

Tax

 

Taxes: only about 4% of the population pays taxes through a PAYE system, the rest, the vast majority pay on the basis of an annual tax return. In total only about 10 million people pay tax but that number is growing fast, the majority of tax income comes from big business. There are lots of low earners in the system who don't make enough to pay tax.

 

I hope that makes sense to you, if it doesn't feel free to ask away.

 

 

 

Appreciate your efforts, thanks for that and sure it will help many others wondering the same thing. I did already understand most of it but the foreign currencies held, to pay accounts...are you saying they keep US$, to pay US accounts, effectively the same as hedging? 

 

So 10 million people paying tax out of a possible 60-70 million. Many should be paying tax of course but are cash businesses. 

 

I can understand Thailand's exports well exceeding imports as they are very protectionist, why often it is hard to buy quality goods here but this is changing rapidly. And so many countries manufacture and export from here but I would have to say this would be in decline also with competition (and probably better standards and more hi tech capability) from other countries who probably have a more favourable ex rate.

 

The other thing I keep seeing is the Corona virus has decimated the tourist industry. From what I could see it was down the toilet long before the Corona virus came along with hotel owners reporting bookings down 60% and no future bookings. We were at Koh Chang only a month ago and was like a small quiet Thai town. I personally think Thailand has done its dash. It just doesn't have much bang for the buck anymore, attitudes of service people have changed, Hotels are outdated with little money spent on maintenance. Accidents, scammers, careless tour operators. You could find better beaches / resorts nearly anywhere in the world. 

 

In any case the average Thai seems to be in debt and struggling. It's just very hard to reconcile it all. Maybe we're all just wishful thinking back 8 years ago when it was very favourable ex wise to live here. 

Edited February 20, 2020 by Kenny202

[saengd]

39 minutes ago, Kenny202 said:

Appreciate your efforts, thanks for that and sure it will help many others wondering the same thing. I did already understand most of it but the foreign currencies held, to pay accounts...are you saying they keep US$, to pay US accounts, effectively the same as hedging? 

 

So 10 million people paying tax out of a possible 60-70 million. Many should be paying cash of course but are cash businesses. 

 

I can understand Thailand's exports well exceeding imports as they are very protectionist, why often it is hard to buy quality goods here but this is changing rapidly. And so many countries manufacture and export from here but I would have to say this would be in decline also with competition (and probably better standards) from other countries who probably have a more favourable ex rate.

 

The other thing I keep seeing is the Corona virus has decimated the tourist industry. From what I could see it was down the toilet long before the Corona virus came along with hotel owners reporting bookings down 60% and no future bookings. We were at Koh Chang only a month ago and was like a small quiet Thai town. I personally think Thailand has done its dash. It just doesn't have much bang for the buck anymore, attitudes of service people have changed, Hotels are outdated with little money spent on maintenance. Accidents, scammers, careless tour operators. You could find better beaches / resorts nearly anywhere in the world. 

 

In any case the average Thai seems to be in debt and struggling. It's just very hard to reconcile it all. Maybe we're all just wishful thinking back 8 years ago when it was very favourable ex wise to live here. 

Around 60% of all trade bills are settled in USD, the US Dollar is the currency of traders. Increasingly however currency swaps have come into play, especially between Thailand China, that avoids the needs for USD. The remaining 40% of trade bills are settled in the currencies of the trading partner, that way we avoid needing to access the Forex market.

 

Tax - the population is 69 million but the workforce is only 22 million, Thailand is an ageing population. So 10 million pay tax, that's around 50%.

 

Tourism - one of the major problems is that, as tourist numbers have grown each year, more people have entered the tourist related market by building hotels and offering tourist related services. That growth in tourist services supply has outstripped the number of visiting tourists, even though that number is very high. So it comes as no surprise that hotels only have 60% occupancy, the problem is there's too many hotel rooms and that's even before the impact of the coronavirus.

 

Lastly....people are struggling, the average Thai is finding it difficult, many have graduated from rural poor to middle class and have borrowed heavily for cars and homes, consumer debt is around 78% of GDP....many have made that transition on the back of the tourist industry and now is a good time for water to find its own level, a few will have to drown I'm afraid.  

Edited February 20, 2020 by saengd

[saengd]

A few bits and pieces to fill in some gaps:

 

The Thai Baht is linked to the value of USD by means of what is called floating peg, many currencies are linked the same way. That means BOT can adjust the value of THB/USD within a range, it's not a hard peg it floats. But the value of the Baht must also be geared towards the value of ASEAN currencies so BOT must watch and balance several exchange rates, But USD is the key one, that's what determines its value mostly. So the value of USD is importannt because 60% of trade bills use it for settlement AND it's the main guide for the strength of the Baht. Note the importance of USD to Thailand, also think what happens to the Baht when USD gets stronger, the value of the Baht must rise against other currencies. And BOT's coffers are filling up with USD (and other currencies) because Thailand is successful at exporting goods overseas, it hardly seems fair they should be penalized as a currency manipulator.

 

Tourism: Reading in the UK press this morning that around one fifth of all UK property is now Air-B&B, that's 20%, can you imagine what the percentage must be in Thailand and what the impact of that must be on the hotel industry, another reason why the hotels have only got 60% occupancy. Perhaps the right conclusion is not that Thailand has done its dash or that TAT is lying about tourist numbers, perhaps the right conclusion is that TAT has been right all along, it's just that we can't easily see all those tourists by traditional means. I don't know about anyone else but I can't always distinguish between Asian nationalities, unless I hear them speak.

 

"Thailand is all about export, manufacturing, tourism and agriculture". Exports grew year on year for several years and peaked at USD 22.5 bill./month last July, today they are are off at circa USD 19 bill., that's still a very good number. Imports today total about USD 18 bill./month which means the surplus is getting smaller, down to under USD 1 bill as of December, in fact the surplus in December was USD 570 million, that's very positive news for the value of THB. BUT, exports is not the only contributor to the current account surplus, Foreign Direct Investment (FDI) is also a major contributor.

 

FDI comes in two forms, foreign companies investing in Thailand longer term and hot money looking for a temporary home. As long as Thailand looks like a good and safe place to invest, major companies will continue to invest here and indeed they continue to to do that. Hot money typically invests in government bonds which are seen as very safe, slaes of which are always oversubscribed and in the SET, interest rates play a role in both of those things. Which is why BOT has cut the lending rate twice in the past six months, in an attempt to curb those inflows. It's a difficult balancing act trying to prevent the money coming in for the purposes you don't want whilst keeping the money flow for the ones you do want.

 

Lastly, THB strengthens when USD is sold and THB is purchased. THB weakens when THB is sold and USD is purchased.  The same things DO NOT happen when other currencies are bought and sold against THB.

 

All done, sorry if I got carried away it's just that it's a very complicated picture where lots of things are interconnected. Lots of posters say THB is strong because the elite keep it that way and that it is being manipulated. That's a simple answer that's laughable and avoids having to think about the mechanics of it all, it does nothing more than demonstrate that they don't understand what is a very complex interconnected problem.

 

 

 

 

 

 

 

[Kenny202]

I for one appreciate the time you have taken to explain something many of us don't really understand and accept most of what you say except about tourism. I am sure as you say a percentage of accomodation has gone to ABNB but you would only have to open your eyes in the major tourist areas to see the people just aren't here, and they weren't here before Corona. I have recently been up north and to the islands at what would be considered the start of high season. Extremely quiet up north (Chinese tourist areas) and daily reports and photos of Pattaya soi's and venues empty. I know Euro tourism is a very small percentage of the pie here, but I live up country and the feeling is palpable. Everyone is feeling the pinch and this has only just started.

[saengd]

11 minutes ago, Kenny202 said:

I for one appreciate the time you have taken to explain something many of us don't really understand and accept most of what you say except about tourism. I am sure as you say a percentage of accomodation has gone to ABNB but you would only have to open your eyes in the major tourist areas to see the people just aren't here, and they weren't here before Corona. I have recently been up north and to the islands at what would be considered the start of high season. Extremely quiet up north (Chinese tourist areas) and daily reports and photos of Pattaya soi's and venues empty. I know Euro tourism is a very small percentage of the pie here, but I live up country and the feeling is palpable. Everyone is feeling the pinch and this has only just started.

Yes I agree, tourist numbers are well done and in some areas it's drastic but that's only to be expected given the pandemic. The important questions are, how soon will things recover and to what degree. I can't answer the first one but I'm betting the answer to the second is things will recover to 100% of previous capacity, why wouldn't they.

[Kenny202]

34 minutes ago, saengd said:

Yes I agree, tourist numbers are well done and in some areas it's drastic but that's only to be expected given the pandemic. The important questions are, how soon will things recover and to what degree. I can't answer the first one but I'm betting the answer to the second is things will recover to 100% of previous capacity, why wouldn't they.

But things were really in trouble at the start of high season before anyone heard of Corona virus? I think that is the operative word....numbers. And the numbers and stats that are quoted don't seem to add up to reality. We were at the white temple / Chiang Rai and Pitsanulok early January, major Chinese destinations at the start of high season, long before Corona virus scare. And I have been to both of these places a few times before and you couldn't move. Same as Koh Chang. Beachfront resort 800 baht a night inc breakfast. 5 people at breakfast in the morning 100 room resort.

Edited February 21, 2020 by Kenny202

[saengd]

1 hour ago, Kenny202 said:

But things were really in trouble at the start of high season before anyone heard of Corona virus? I think that is the operative word....numbers. And the numbers and stats that are quoted don't seem to add up to reality. We were at the white temple / Chiang Rai and Pitsanulok early January, major Chinese destinations at the start of high season, long before Corona virus scare. And I have been to both of these places a few times before and you couldn't move. Same as Koh Chang. Beachfront resort 800 baht a night inc breakfast. 5 people at breakfast in the morning 100 room resort.

Again I agree. Looking at the economy as a whole, the causes of slowed growth a year ago were different, mostly attributable to Trumps trade war with China which disrupted supply chains. Elsewhere in the world many people were looking at Brexit as being an event that would impact global growth but that outcome turned positive. When people think the local or international economies are in poor shape or headed for recession, they cut back on discretionary spending and tourism inevitably takes a hit.

 

A third point to make is that the nature of tourism has evolved in Asia, mass tours are on the way out and independent travel is becoming more of the norm, those are tourists that are not always easy to spot and they don't always go to the traditional tourist locations. None of that of course suggests there aren't other reasons for the downturn, I'm sure there are but they are not that obvious to me,if you have an idea I'd be pleased to hear it.

[Chivas]

Have just woken to see the Thai Baht has tanked this last 24 hours dropping 1.2% against the benchmark USD

Currently right out to 41.67 interbank

[saengd]

2 minutes ago, Chivas said:

Have just woken to see the Thai Baht has tanked this last 24 hours dropping 1.2% against the benchmark USD

Currently right out to 41.67 interbank

That's USD strengthening, it's very close now to 100%. https://www.investing.com/currencies/us-dollar-index

[Chivas]

1 minute ago, saengd said:

That's USD strengthening, it's very close now to 100%. https://www.investing.com/currencies/us-dollar-index

As its the benchmark frankly it doesnt matter lol but yes agree

Unfortunately Sterling taking that same slight hit as well against the Greenback otherwise Sterling/Baht would have been well into the 41s Interbank

Just had quick look and was 40.81 just now

[saengd]

3 minutes ago, Chivas said:

As its the benchmark frankly it doesnt matter lol but yes agree

Unfortunately Sterling taking that same slight hit as well against the Greenback otherwise Sterling/Baht would have been well into the 41s Interbank

Just had quick look and was 40.81 just now

Umm, I don't agree. The benchmark is the Dollar of course but it's worth can increase or decrease according to the Dollar Index, So a USD at 96% of the DI is less valuable and is weaker than one at 98% and when that strengthening or weakening occurs it impacts on the other halves of each USD related pair. It's only by doing what you just did, looking at other major currencies against the Dollar, such as GBP, that it can be seen which half of the pair moved, in todays example USD moved up and GBP and THB remained largely flat.

[phkauf]

16 hours ago, saengd said:

Sorry, forgot to add....I'm very much in the camp that says USD/THB will head towards 25 over the next decade, I just don't believe for one second it's going the other way. And since GBP/USD is based almost solely on USD/THB, I'm expecting low to mid 30's for the Pound over that same period.

I'll take the other side of that USD/THB trade. Too many headwinds for Thailand over the near and long term future. Unless there is some radical political and economic policy changes Thailand will become less attractive for business over the next decade.

[saengd]

The US Dollar Index was constructed after the Bretton Woods agreement in 1973, that year represents 100 or par. The DI measures USD against a basket of major currencies to determine its value and is adjusted accordingly in real time. That value serves as an input to traders and to the forex system which also adjusts exchange rate values, based on DI movements.

[saengd]

1 minute ago, phkauf said:

I'll take the other side of that USD/THB trade. Too many headwinds for Thailand over the near and long term future. Unless there is some radical political and economic policy changes Thailand will become less attractive for business over the next decade.

Ahhhh, you can't use the word "if" or "unless" when you're making a bet, it's a binary thing, yes as is or no as is.

Do you still have the same courage of your convictions?

[stament]

4 hours ago, saengd said:

A few bits and pieces to fill in some gaps:

 

The Thai Baht is linked to the value of USD by means of what is called floating peg, many currencies are linked the same way. That means BOT can adjust the value of THB/USD within a range, it's not a hard peg it floats. But the value of the Baht must also be geared towards the value of ASEAN currencies so BOT must watch and balance several exchange rates, But USD is the key one, that's what determines its value mostly. So the value of USD is importannt because 60% of trade bills use it for settlement AND it's the main guide for the strength of the Baht. Note the importance of USD to Thailand, also think what happens to the Baht when USD gets stronger, the value of the Baht must rise against other currencies. And BOT's coffers are filling up with USD (and other currencies) because Thailand is successful at exporting goods overseas, it hardly seems fair they should be penalized as a currency manipulator.

 

Tourism: Reading in the UK press this morning that around one fifth of all UK property is now Air-B&B, that's 20%, can you imagine what the percentage must be in Thailand and what the impact of that must be on the hotel industry, another reason why the hotels have only got 60% occupancy. Perhaps the right conclusion is not that Thailand has done its dash or that TAT is lying about tourist numbers, perhaps the right conclusion is that TAT has been right all along, it's just that we can't easily see all those tourists by traditional means. I don't know about anyone else but I can't always distinguish between Asian nationalities, unless I hear them speak.

 

"Thailand is all about export, manufacturing, tourism and agriculture". Exports grew year on year for several years and peaked at USD 22.5 bill./month last July, today they are are off at circa USD 19 bill., that's still a very good number. Imports today total about USD 18 bill./month which means the surplus is getting smaller, down to under USD 1 bill as of December, in fact the surplus in December was USD 570 million, that's very positive news for the value of THB. BUT, exports is not the only contributor to the current account surplus, Foreign Direct Investment (FDI) is also a major contributor.

 

FDI comes in two forms, foreign companies investing in Thailand longer term and hot money looking for a temporary home. As long as Thailand looks like a good and safe place to invest, major companies will continue to invest here and indeed they continue to to do that. Hot money typically invests in government bonds which are seen as very safe, slaes of which are always oversubscribed and in the SET, interest rates play a role in both of those things. Which is why BOT has cut the lending rate twice in the past six months, in an attempt to curb those inflows. It's a difficult balancing act trying to prevent the money coming in for the purposes you don't want whilst keeping the money flow for the ones you do want.

 

Lastly, THB strengthens when USD is sold and THB is purchased. THB weakens when THB is sold and USD is purchased.  The same things DO NOT happen when other currencies are bought and sold against THB.

 

All done, sorry if I got carried away it's just that it's a very complicated picture where lots of things are interconnected. Lots of posters say THB is strong because the elite keep it that way and that it is being manipulated. That's a simple answer that's laughable and avoids having to think about the mechanics of it all, it does nothing more than demonstrate that they don't understand what is a very complex interconnected problem.

 

 

 

 

 

 

 

Like others have mentioned I really appreciate the time and effort you have taken in explaining things which a lot of people don't understand.

 

Very insightful. Where do you see the rate going over the next few months, are we really seeing the beginning of a downward trend for the baht or is this just a reaction to Corona and recent interest rate cuts? 

 

I read today Thai Airways are cancelling and reducing flights due to Corona.

[ThaiBrian]

It broke out of a long, long downtrend with the BAHT/USD pair. I'm in desperate need of BAHT but I'm waiting until the end of the month when rent and bills are due. And I'll only take out what I need as I suspect the baht will continue to drop against the dollar.

 

Actually, I'm wrong. Just pulled up the chart. On the daily, we're very bullish, but weekly and monthly shows we are very far from breaking the downtrend. But, the fundamentals can change that. Thailand seems to be on the cusp of an economic recession/depression. 

Edited February 21, 2020 by ThaiBrian

[saengd]

14 minutes ago, stament said:

Like others have mentioned I really appreciate the time and effort you have taken in explaining things which a lot of people don't understand.

 

Very insightful. Where do you see the rate going over the next few months, are we really seeing the beginning of a downward trend for the baht or is this just a reaction to Corona and recent interest rate cuts? 

 

I read today Thai Airways are cancelling and reducing flights due to Corona.

I wouldn't want to begin to guess at what the rates might do over the next few months, all the indications are that THB will weaken but anything could happen, the flu is a real game changer and also a huge unknown. The 200 day moving average tells the story, that determines a meaningful trend. I'm only really interested in the longer term direction, 2, 5 and 10 years and looking at that picture I continue to think THB will remain strong(er), 25 per USD is the future.