Why The Huge Disparity Between The "offshore" Rate And Normal Rate Of Us To Thb?

[Naam]

Currency traders can certainly arbitrage on the gap between the onshore and the offshore rates.

no, they can't. if there were possibilities to arbitrage then the difference between off-/onshore rate would not have lasted more than 5 months.

Or 5 minutes! If there exists a instutionally standard mechanism to make arb execution on such an obvious play, the spread is narrowed down to a wash (vs. execution cost), like immediately.

correct!

[boatguy]

However if you were to have a nationwide debit card you could use it in thailand to get your money without having to pay any transfer fees. The card has no overseas fees for usage.

Would this 'nationwide debit card' be the same or similiar to a check account debit card from a nationwide US bank??

Would the Thai bank accept this debit card as well, particularly if there was a high enough 'limit' on the debit card??

Edited January 24, 2008 by boatguy

[sonicdragon]

However if you were to have a nationwide debit card you could use it in thailand to get your money without having to pay any transfer fees. The card has no overseas fees for usage.

Would this 'nationwide debit card' be the same or similiar to a check account debit card from a nationwide US bank??

Would the Thai bank accept this debit card as well, particularly if there was a high enough 'limit' on the debit card??

No, I believe this would be a card issued for use with an account from www.nationwide.co.uk

[pkrv]

I can sense Sonicdragon's frustration with dealing with this subject and it is because it spans two concepts that are completely separate.

1) There is the case of Joe public. If you wish to discuss this subject you must declare what country you are from. Why do I say that well I'm UK based so Sterling/GBP and UK institutions are the mechanisms I have to transfer money to Thailand. There have been posts regarding the UK based Nationwide building society.

For a time Nationwide did give great rates for converting GBP to Thai Baht/THB absolutely correct, that has changed, but only for 'converted' currency transfers to Thailand. None the less the Nationwide's cash point card is still perfect for drawing cash from a cash point whilst in Thailand, there are no fees and you get what is basically the artificial on-shore rate. Also Nationwide is still great for transferring a pure GBP trade to Thailand you pay a one off fee of 20 GBP to cover the SWIFT transfer transaction fees.

For Joe public - Regardless of currency you transfer once you have transferred the money to Thailand you get the rate that the particular receiving Thai institution (e.g. Bangkok bank etc) is giving on the day the funds arrive (usually 1-2 working days later). Guess what you probably only have one Thai bank account (like me) or are dealing with a developers bank (like me), unless you open multiple accounts you cannot 'shop around' and attempt to guess the 'best rate' based on today's quotes, you get what you get, full stop.

2) Global activity - International trade in the THB is broken. As has absolutely correctly been pointed out there is a concept of Arbitrage i.e. exploiting the differences in prices in markets. What was not said is that there are software engines monitoring the market in real time and automatically executing HUGE trades in this area. Market 'discrepancies' actually last a fraction of a second, in a great many markets.

So given that at the end of the day all global trades involve FX and the onshore offshore rate issue persists if you think you can execute trades to leverage the situation, simultaneously beating computers spitting out instructions or indeed massive trading floors dedicated to this function, I think you need to re-evaluate your position.

In summary I try to think of this issue as a tax issue, until transparent trade is restored I think in terms of 'god knows what rate I will get when my home currency arrives in Thailand '.

However I do have a question - is there any indication of when things will return to normal?

Edited January 25, 2008 by pkrv