Baht Decline Upon Us?

[bkkandrew]

Today super rich gave 69.20 GBP - THB at 17.20, as opposed to 69.05 first thing today and the weekend (holiday) rate of 68.20. Spread was narrow (buy was 69.50 at 17.20). Offshore widened to 65.135 (BBC)

OK Sterling has had a good day all-round, but I think realisation is setting in. My bets on 75.5 GBP - THB by 01/06/07, then a gradual drop from then to about 88. Comments anyone?

[Maestro]

I believe this is more a reflection of the USD’s weakening against the GBP than a decline of the THB.

--

Maestro

[bingobongo]

EXCHANGE-RATE WOES

Strong baht blunts Thai edge

Key index at worst level in almost eight years

The Kingdom's competitiveness has decreased to its lowest level in seven years and eight months in baht terms.

http://www.nationmultimedia.com/2007/04/18...ss_30032058.php

[LaoPo]

EXCHANGE-RATE WOES

Strong baht blunts Thai edge

Key index at worst level in almost eight years

The Kingdom's competitiveness has decreased to its lowest level in seven years and eight months in baht terms.

http://www.nationmultimedia.com/2007/04/18...ss_30032058.php

Thanks bingobongo; interesting but also alarming article.

some excerpts:

The continuing appreciation of the baht was the main factor dragging down competitiveness, compared with 21 currencies of trading partners and competitors.

Export value showed a sharp increase of 17.7 per cent and 18.4 per cent in the first two months of the year, respectively, which made the Commerce Ministry maintain its export target of 12.5 per cent.

Analysts, however, have criticised that the sharp rise in exports resulted from old orders, as exporters in many sectors have complained about their reduced margin from the stronger baht.

It bought US$15 billion (Bt524 billion) worth of greenbacks throughout last year to weaken the baht before introducing its unremunerated 30-per-cent reserve requirement last December 18.

In the first quarter of this year, the BOT bought $4 billion worth of greenbacks to defend large sales of dollars by exporters and commercial banks....

Moreover, two Thai banks have been accused of shorting the dollar by selling out of them, thus resulting in the baht's massive strength.

From:

http://www.nationmultimedia.com/2007/04/18...ss_30032058.php

Well, this article shows us at least some background to the strong Thai Baht....

LaoPo

[cclub75]

It bought US$15 billion (Bt524 billion) worth of greenbacks throughout last year to weaken the baht before introducing its unremunerated 30-per-cent reserve requirement last December 18.

In the first quarter of this year, the BOT bought $4 billion worth of greenbacks to defend large sales of dollars by exporters and commercial banks....

Moreover, two Thai banks have been accused of shorting the dollar by selling out of them, thus resulting in the baht's massive strength.

From:

http://www.nationmultimedia.com/2007/04/18...ss_30032058.php

This article is a good reminder... of the lies of the BOT.

First lie :

-we didn't intervene in currency market

Second lie :

-we didn't give instruction to thai banks

As I said previously :

-the BOT is buying something (USD) that is just loosing value, every day.

-and local banks and exporters who are shorting USD... are not doing "speculation" : they are just managing their money with a bit of common sense, contrary to the BOT !

Today, Euro hit 1.36. And yesterday we had 2 for 1 GBP. Eventually, BOT and Miss Tarisa will make origamis with their mountain of USD (70 billions)... Well done folks. Keep the pace. And the faith.

[Naam]

As I said previously :

-the BOT is buying something (USD) that is just loosing value, every day.

that is what most asian central banks do since decades lead by China, Japan and Taiwan. are these central bankers all losers or do they act with a certain rationale in mind?

[bkkandrew]

As I said previously :

-the BOT is buying something (USD) that is just loosing value, every day.

that is what most asian central banks do since decades lead by China, Japan and Taiwan. are these central bankers all losers or do they act with a certain rationale in mind?

If I am not mistaken, the volume of USD purchases has increased by BOT exponentially during the last 6-months at the very time that China, Japan etc have divested their USD holdings to EURO and GBP???

Edited April 18, 2007 by bkkandrew

[Naam]

As I said previously :

-the BOT is buying something (USD) that is just loosing value, every day.

that is what most asian central banks do since decades lead by China, Japan and Taiwan. are these central bankers all losers or do they act with a certain rationale in mind?

If I am not mistaken, the volume of USD purchases has increased by BOT exponentially during the last 6-months at the very time that China, Japan etc have divested their USD holdings to EURO and GBP???

they have divested a part of their "new" surpluses into EUR and GPB. the lion share is still (and most probably will be used for a long time) to increase their USD holdings.

will later post a website (updated monthly) concerning reserves held in USD.

[Naam]

As I said previously :

-the BOT is buying something (USD) that is just loosing value, every day.

that is what most asian central banks do since decades lead by China, Japan and Taiwan. are these central bankers all losers or do they act with a certain rationale in mind?

If I am not mistaken, the volume of USD purchases has increased by BOT exponentially during the last 6-months at the very time that China, Japan etc have divested their USD holdings to EURO and GBP???

they have divested a part of their "new" surpluses into EUR and GPB. the lion share is still (and most probably will be used for a long time) to increase their USD holdings.

will later post a website (updated monthly) concerning reserves held in USD.

[LaoPo]

As I said previously :

-the BOT is buying something (USD) that is just loosing value, every day.

that is what most asian central banks do since decades lead by China, Japan and Taiwan. are these central bankers all losers or do they act with a certain rationale in mind?

If I am not mistaken, the volume of USD purchases has increased by BOT exponentially during the last 6-months at the very time that China, Japan etc have divested their USD holdings to EURO and GBP???

they have divested a part of their "new" surpluses into EUR and GPB. the lion share is still (and most probably will be used for a long time) to increase their USD holdings.

will later post a website (updated monthly) concerning reserves held in USD.

1. Are you talking about China and Japan ?

2. China has a new 'basket-of-foreign-currencies' now and I think nobody can be sure at this very moment WHAT the Chinese will do with their gigantic surpluses; Beijing will carefully decide day-by-day, hour-by-hour where to put their reserves, taken the weakening US$ into consideration. It's a fragile process, very fragile.

3. The BOT/Thailand had to buy US$'s (14 Billion in 2006 and 4 Billion in the first quarter of 2007) to try and weaken the Baht a bit; if that will be successfull remains to be seen.

LaoPo

[lordofdelusion]

If I say so myself, I have done a good job managing my investments over the years. It allowed me to live comforatably in retirement at the age of 50. However, I am baffled by the exchange rate subject. Despite the end of the world ramblings of some here, the US economy moves forward. The Dow has hit 3 records this week. The Thai economy is suffering. Recent rumblings from the fed in the US would indicate if anything, a rate hike. Thailand is lowering rates. The dollar has weakend worldwide due to trade and budget defecits. (This administration would be the subject of a different, very harsh thread a) But it has weakend more to the Thai Baht than other regional currencies. Why? Help, anyone?

[cclub75]

As I said previously :

-the BOT is buying something (USD) that is just loosing value, every day.

that is what most asian central banks do since decades lead by China, Japan and Taiwan. are these central bankers all losers or do they act with a certain rationale in mind?

Of course Naam.

But you need to relativize... Time and scale.

Time : the fall of USD has become apparent, and has gained pace, only recently. What was true and rational "decades" ago, has changed.

Scale : China can afford, for strategic reasons, to loose value on its mountain of USD reserves (1 trillon and counting).

And you'll note that China has already started to switch its mind : they have announced the creation of an agency to use the USD reserves to buy... assets. Hard ones. It's a game. A strategic one.

By accumulating USD... China clearly is developping a weapon of finance destruction that could be used as a leverage for political gains...

As for South Korea for instance, if you compare the ratio GDP/USD reserves... well it's not at the advantage of Thailand.

So in this picture, right now, where do you put Thailand and the BOT ?

The answer looks obivous to me : nowhere. Or at least, in the loosers camp.

[Naam]

So in this picture, right now, where do you put Thailand and the BOT ?

The answer looks obivous to me : nowhere. Or at least, in the loosers camp.

i refrain to put the BOT anywhere Club as there too many unknown factors seem to exist which makes it difficult for us outsiders to render a fair jugdment. the fact remains that the "losses" the BOT incurred by selling THB against USD dollars are not actual losses per se but only fictive ones. any central bank selling local currency to weaken it is doing the right thing in my opinion. it works as long as that local currency does not float back and triggers a higher inflation rate. that is not case with THB, on the contrary.

completely different are cases when reserves are sold to prop up a weak currency.

[Naam]

Time : the fall of USD has become apparent, and has gained pace, only recently. What was true and rational "decades" ago, has changed.

i see a different picture looking back 25 years (and more) during which period we had fluctuations as high of the USD vs. EUR/DEM. that too applies for the last several years after introduction of the €UR in 1999.

an even better picture provides the fluctuation of USD vs. DEM (Deutsche Mark) take a look a the graph. nevertheless i agree with you that a big downturn has and is still occuring since the texan village idiot and "leader of the free world" and his puppetmasters are in power.

[britmaveric]

Cyclic -least we forget. $ is fine and yank economy is doing quite well.

[Meerkat]

completely different are cases when reserves are sold to prop up a weak currency.

Strictly speaking, that's exactly what the BOT was doing - buying USD.

[Naam]

completely different are cases when reserves are sold to prop up a weak currency.

Strictly speaking, that's exactly what the BOT was doing - buying USD.

rise and shine! you should have strictly a strong coffee right away to gear up your grey cells

when a central bank -in this case the BOT- is buying foreign currency against its domestic currency it tries to WEAKEN the domestic one... which in the case of THB is too STRONG. the BOT is using THB which are NOT reserves to buy USD which are reserves.

no local currency held by any central bank can be called reserves.

[cclub75]

i see a different picture looking back 25 years (and more) during which period we had fluctuations as high of the USD vs. EUR/DEM. that too applies for the last several years after introduction of the €UR in 1999.

an even better picture provides the fluctuation of USD vs. DEM (Deutsche Mark) take a look a the graph. nevertheless i agree with you that a big downturn has and is still occuring since the texan village idiot and "leader of the free world" and his puppetmasters are in power.

I have a preference for the USD index. It speaks by itself. Too.

I continue to think that it's dangerous to apply cycles theories, like for classic markets (real estate for instance) who are following a logic of growth/bubble/burst, etc.

For a very basic reason : USD is absolutly not a "normal" market, eventhough forex is said to be perfect market (volatility, volume, global, liquid).

A currrency that was used since end of WWII as a "reserve" currency and as a "strategic" currrency (to buy oil) wordwide, and backed by the first economy and the first military power in the world... is more than a currency : it's a political tool, it's a geopolitical magnifier.

For that matter, to try to compare the USD situation in 1985 or 1999 with what is happening now is I think a mistake.

Simply because, the world is shifting. Center of gravity is going far east.

I'm always astonished by the ability of people to dismiss history. China has ruled the world. Spain has ruled the world, with the gold of South America. In their time.

England, with its navy and its Pound, has ruled the world. Not too long ago.

Why it should be different with US ans USD ?

Because, we don't want it to happen ?

Edited April 19, 2007 by cclub75

[Naam]

Cyclic -least we forget. $ is fine and yank economy is doing quite well.

at present the yank economy is doing not too badly especially when compared with some countries of the €URo-zone or Japan. we have to wait and see what will happen in the coming months when the cash -generated by refinancing mortgages- is missing.

that the dollar is doing fine is of course an ironic statement. the US budget deficit is horrendous and might even worsen. it all depends on what kind of additional "foreign excursions" the moron in charge will embark.

[Naam]

Why it should be different with US ans USD ?

because no country ever had the political AND military clout the U.S. has and will have for a few decades to come. the last hundred years and especially the last few years have demonstrated clearly that the Greatest Nation on Earth™ will not hesitate to act as it pleases and when it seems favourable.

for an experienced investor is does not really matter which way the USD is heading even when holding USD denominated assets. there are many ways to hold USD and protecting the investment value seen from the perspective of different currencies.

[bkkandrew]

Why it should be different with US ans USD ?

because no country ever had the political AND military clout the U.S. has and will have for a few decades to come. the last hundred years and especially the last few years have demonstrated clearly that the Greatest Nation on Earth™ will not hesitate to act as it pleases and when it seems favourable.

for an experienced investor is does not really matter which way the USD is heading even when holding USD denominated assets. there are many ways to hold USD and protecting the investment value seen from the perspective of different currencies.

Being a little tounge-in-cheek, you could also point out that no country has ever accumulated a trade and budget deficit of the proportion of the US has at this time.. The whole shooting match has an Enron feel about it. The Texan goon is looking and sounding more like Ken Lay every day!

[beechguy]

Why it should be different with US ans USD ?

because no country ever had the political AND military clout the U.S. has and will have for a few decades to come. the last hundred years and especially the last few years have demonstrated clearly that the Greatest Nation on Earth™ will not hesitate to act as it pleases and when it seems favourable.

for an experienced investor is does not really matter which way the USD is heading even when holding USD denominated assets. there are many ways to hold USD and protecting the investment value seen from the perspective of different currencies.

You seem very well informed. Just curious, how much and what kind of an effect do you think the stronger pound and euro will have on the U. S. economy? Specifically, how it would effect the average guy in middle america.

Thanks

[jumnien]

The US economy should continue to flourish primarily because of the weak dollar. I wish it were some other way...

[Naam]

You seem very well informed. Just curious, how much and what kind of an effect do you think the stronger pound and euro will have on the U. S. economy? Specifically, how it would effect the average guy in middle america.

i am sorry not being able to assist. this question would receive a multiple of different answers even from "gurus" who are much more qualified than me.

[Naam]

Being a little tounge-in-cheek, you could also point out that no country has ever accumulated a trade and budget deficit of the proportion of the US has at this time.. The whole shooting match has an Enron feel about it. The Texan goon is looking and sounding more like Ken Lay every day!

i fully agree. but as far as Ken Lay is concerned: to me he looks more and more like a choir boy who was caught going after the cookie jar compared to the idiotic criminal from Texas.

if only George sr. had given a raincheck to Barbara instead of...

[Naam]

if only George sr. had given a raincheck to Barbara instead of...

a condom would have done the job too

[bkkandrew]

if only George sr. had given a raincheck to Barbara instead of...

a condom would have done the job too

It is funny though, when comparing footage of the two, as I remember Lay looking like he was thinking "I have really ballsed up here", whilst trying to look in control. Just like Bush now...

[bingobongo]

no more rainbows and lollipops mdeland, it appears the Junta is doing a splendid job of managing the Thailand's finances as they line their pockets

Govt suffers Bt190bn financial deficit 1st half of 2007

The Thai government suffered a financial deficit of about nearly Bt190 billion baht -- Bt189.43 billion -- in the first half of fiscal 2007, up from a deficit of only Bt74.69

billion during the corresponding period of Fiscal 2006, a Finance Ministry spokesman said Thursday.

http://etna.mcot.net/query.php?nid=29005

[bingobongo]

Four Asian nations hit by 1997-98 financial crisis face vulnerability

Thailand now faces greater risks due to a decline in the ratio of foreign reserves to short-term debt and an increase in short-term capital inflows.

http://www.iht.com/articles/2007/04/19/news/currency.php

[samran]

no more rainbows and lollipops mdeland, it appears the Junta is doing a splendid job of managing the Thailand's finances as they line their pockets

Govt suffers Bt190bn financial deficit 1st half of 2007

The Thai government suffered a financial deficit of about nearly Bt190 billion baht -- Bt189.43 billion -- in the first half of fiscal 2007, up from a deficit of only Bt74.69

billion during the corresponding period of Fiscal 2006, a Finance Ministry spokesman said Thursday.

http://etna.mcot.net/query.php?nid=29005

this is a serious question, why are government debts necessarily a bad thing? I have my own view that debt isn't necessarily bad, but that is a personal opinion. Why do you think it is?

And, if the government (via the ministry of finance or public debt management office) have issued debt (ie bonds) what as happend to the rating of this debt. Does anyone really think that the RTG would default?

And if tax receipts are down, why is it so? Factors which cause economic growth and downturns usually happen anywhere from 18 months to 2 years before you actually see the effects. The basic rule of thumb of central bankers is that any change in interest rates usually takes this amount of time to wash through the economy.

Honest question, I just want to see your views on this as I don't think the whole 'debt is bad' is a vailid argument.