Concern for the Thai baht and liquidity if Thailand does not move swiftly to raise interest rates

[jacko45k]

9 minutes ago, Berkshire said:

Rising fuel prices is a worldwide phenomenon.  The US has raised interest rates.  Hasn't really helped gas prices, has it?

And a weaker currency relative to the USA$ would increase them further. 

The USA increasing interest rates has impacted gas prices, forcing them higher outside the US.  Even if crude prices remain unchanged, prices outside the USA will rise. 

 

Edited June 11, 2022 by jacko45k

[freedomnow]

Yes, a lower baht is panacea for the predicament the country is in.

 

JUST DO IT vs all this market intervention so the stinking rich can

get their hiso imported cars and other top toys "cheaper".

[sanuk711]

While we are on Currencies---- Going across the border soon--Can anyone tell me why the Lao's Kip has crashed-

8 months ago-- 1 Baht = 200+ Kip.  Today 1 Baht =400+ Kip.

 

Wow doubled my Holiday spending...........

[jacko45k]

1 minute ago, sanuk711 said:

While we are on Currencies---- Going across the border soon--Can anyone tell me why the Lao's Kip has crashed-

8 months ago-- 1 Baht = 200+ Kip.  Today 1 Baht =400+ Kip.

 

Wow doubled my Holiday spending...........

It usually is not a good thing when a county's currency is crashing. I expect there is serious inflation too.

[Onerak]

37 minutes ago, freedomnow said:

Yes, a lower baht is panacea for the predicament the country is in.

 

JUST DO IT vs all this market intervention so the stinking rich can

get their hiso imported cars and other top toys "cheaper".

A higher baht vis a vis dollar will immediately trigger punitive tariff from US because US exports to Thailand will suffer. US wants baht to be 25/dollar not 40/dollar for US export to Thailand to increase. 

Edited June 11, 2022 by Onerak

[Gecko123]

Thailand has to be inclined to keep the baht relatively weak in order to revitalize the tourism industry and keep exports competitive on world markets. The fact that they are under pressure to raise rates to not only fight inflation but to stop capital flight out of the country at the same time the economy is still struggling does not bode well for Thailand and other emerging markets.

 

After the 1929 stock market crash and also the 1998 financial crisis, money dried up and a lot of overseas money was repatriated home, triggering major economic downturns in markets dependent on foreign capital. Thailand's central bank apparently is seeing signs that this may be happening again. Having to raise interest rates not only to attract foreign investment capital but to fight inflation is a real double whammy for Thailand.

 

In the low interest rate and easy money environment we have experienced in the past 20 plus years people have forgotten that there is a competition for capital. This warning from Thailand's central bank is a reminder of this reality, and could be a canary in the coal mine for Thailand and other emerging markets. Thailand may be forced to raise interest rates even if it will inadvertently strengthen the baht and weakening the economy in the process.

 

I am sure many emerging markets are facing this same dilemma too, but it is particularly ominous for Thailand because of their dependency on the tourism industry. I'd say Thailand has more things to worry about just now than the exchange rate for foreigners cashing their retirement checks.

 

Edited June 11, 2022 by Gecko123

[Walker88]

It's not so much authorities are behind the curve; it's more about what is the least bad thing for the Thai economy.

 

Raise interest rates and the baht stays strong, but the economy slows. Inflation, however, could be kept in check.

 

Keep rates low and the baht weakens, exports and tourism might benefit, but inflation rises and hurts the poor, which is to say the vast majority of Thais.

 

The entire world faces the same problem right now. Asia seems to be in the initial stages of a competitive devaluation vs the dollar. The Japanese yen hit 134 in NY last night, the highest in a few decades. That is of concern more to South Korea, and maybe Malaysia, than it is Thailand. China isn't sure what it wants, nor, I suspect, do the authorities there know how to navigate a world where trade is slowing and domestic asset prices are under pressure because of the debt bubble.

 

The EU could be in for a world of hurt because of the 'solution' it imposed on the 2008 Financial Crisis. Govts are in debt and likely cannot deal with higher rates. Banks still have bazillions of NPLs, and actually have weak balance sheets, save for the 'gains' on EU sovereign debt that was a result of the ECB printing money to allow them to buy sovereign debt (and lower sovereign borrowing costs) in 2008+.

 

Some might try to argue that there is some plan in the works, but that is a naive view of how a $65 trillion world economy with a combined $290 trillion of debt might work. NOBODY is clever enough to control such a monster, beside the fact EVERYBODY has competing goals. What's good for China is bad for the US, and vice versa. Over the last few decades hundreds of millions of people have been lifted from poverty largely because the US has run up its debt and operated as the buyer of last resort. Maybe that can continue, but that solution has limits.

 

If I was to pick the one country that could suffer the most, it would be China. Its property bubble is bursting, and property is the asset upon which that economy is built. Its Belt & Road Initiative has taken most of its FX reserves (though accounting allows them to appear in place, despite the fact they aren't some giant box of funds and never were), so it has little room to maneuver. It is a nation bursting at the seams with excess capacity. Here's an example: In the last ten years China has added more steel production capacity than existed in the world before 2010. Unless there is another China to build somewhere, that represents an astonishing amount of redundant capacity, which means bad debts.

 

If China erupts into some sort of financial debacle, and subsequently a social upheaval, Thailand is most definitely going to suffer.

 

The dollar, for all its faults, might be a safehaven. At the moment, the markets seem to think this is the case. Of course, that could all come down if repubs retake power, as they have always been worse for the economy and stock market than Dems (historical fact going back to the Civil War), and the current crop of folks in that Party are even less competent than the ones who brought on 2008.

 

It's going to be an interesting next few years.

[BangkokReady]

6 hours ago, webfact said:

On Monday last, before Wednesday’s meeting of the Bank of Thailand’s Monetary Policy Committee, the Minister of Finance Arkhom Termpittayapaisith expressed a wish to see Thailand maintain a low-interest-rate environment to encourage the economic recovery. The bank maintained rates at a historic low of 0.5% but concerns are rising of a wider divergence between interest rates in the United States and the kingdom if the Federal Reserve follows through on hawkish signals of a 50 basis point rise in June, July and September. This new challenge comes as Thailand has been experiencing a flight of capital since August 2021. Underlying problems and an unbalanced economy are also contributing to a sluggish economic recovery with the kingdom lagging behind its peers.

Isn't this section meant to be a subtitle that relates to the picture?  Maybe one sentence?  There's more info here than in the article below.  It's like having the piece split in two.

[Eric Loh]

1 hour ago, Berkshire said:

Rising fuel prices is a worldwide phenomenon.  The US has raised interest rates.  Hasn't really helped gas prices, has it?

Can’t helped fuel prices much when oil refineries are critically limited and profiteering. Serious enough to warrant a warning from the Biden administration against immorally taking advantage of the bad situation. 

 

[Caldera]

My only concern for the Thai baht is that it doesn't sink low enough.

[itsari]

US dollar on a five year high with the Thai Baht 34.71

Bad timing for Thailand  with the price of oil at around 120 us dollars .

Extra borrowing needed for caping the price of diesel . 

The Thai Government took on caping diesel prices with the thought that the war in eastern Europe would be all over in two months and the oil price would reduce . 

Now if they stop subsidizing energy as it is costing too much there will be a big change in the inflation rate .

No easy way out for them.

 

[Enzian]

Good article in the way it identifies issues. Tho at one point they say heightened liquidity when I think they meant tightened liquidity--probably obvious to everyone. 

I'm just pizzed that Immigration pushed me to convert my FCD account to baht (at 33) in order to have a paper bank book, when the baht may eventually approach 40/dollar--but who knows? Of course those who set up their 800K at 30/dollar really have a beef--but give it a year or two and it may all come back, so little matter. At least my current credit card charges are a better deal. I have a degree in econ fwiw, and I don't see the baht manipulated to any great degree--it's mainly being pushed around by macro and systemic factors at this point. But the large issue is that things for the populace could get much worse if Thailand's policies don't catch up with the neighborhood, as the article says. We all pay for an unprofessional government, the opposite of a bunch of technocrats. 

But when the worldwide recession hits it will all be moot.

[superal]

1 hour ago, Bim Smith said:

Raising interest rates will have little to no effect to what's coming. The truth is the debt bubble is way too high for all countries. Interesting to note that Thailand has, since 2019 been building it's foreign currency and gold reserves to an historical high according to World Bank data which is also used as a tool to prop up the value of the baht. It's like they knew they would be closing the country for two years. Where they get the money from to do that is anyone's guess. But this pushing for an interest rate rise will do nothing. The global crash is coming and in my opinion is more by design than some unfortunate accident. Hold on to your hats. And wallets. Digital IDs passes and wallets are inevitable.

A recent TV money programme from the UK , forecast a dollar collapse in the 4th quarter . Also that foreign currency reserves would lose their value , big time , and better to hold tangible assets such as gold or real estate .

Here in Thailand, the household borrowing is at an all time high and coupled with post covid unemployment , any rise in interest rates will cause problems . Global inflation is rapid with the UK at 11% and the USA at 8% and USA petrol prices at an all time high of 5 dollars a gallon and rising . What is round the corner ? no doubt that the Ukraine war is having an influence but unless they release the safe passage of wheat grain to the world ( Russia is helping itself to it now ) there will be massive starvation in African countries . Not to mention Russian gas/oil exports .

The Thai baht has been well supported in past years with a close alignment to the US dollar but with the US economy being hit by high inflation there can be no way out for the baht , it will lose value .

[itsari]

15 minutes ago, Caldera said:

My only concern for the Thai baht is that it doesn't sink low enough.

You may well get your wish very soon 

[nycjoe]

The way the world is going it is hard to foresee what is around the corner. Things are dismal for the ordinary Thai. Shuttered businesses. Empty hotels. A weaker baht will bring tourism back a bit but those who come will see that It is not the Thailand they remember. It will be years until there is a semblance of a new normal. Inflation is pummeling the poor. Buckle up it is going to be a rocky ride. 

[Iamfalang]

This is all you need:
 

50 baht equals 1 USD

 

coming soon.     It probably won't stop there.  

 

Thank me later.   This is a lock, 99.999% chance in the next few years.   I know.  I am all-knowing, except the exact timing of it.  lol

[shackleton]

Yes we would all love more Baht for our currency tourist's expats ect 

Great if you have $ ????

If its British Sterling  forget it all I can  see is its going lower ????

[hasher69]

3 hours ago, Berkshire said:

Do you even understand what that means?  It's more to do with Thailand having a trade surplus with the US.  America does not want its trade partners to artificially weaken their currency to gain a trade advantage.  Are you suggesting Thailand is deliberately weakening the THB?  I wish they would...:-)

The other way around 

 

3 hours ago, Berkshire said:

Do you even understand what that means?  It's more to do with Thailand having a trade surplus with the US.  America does not want its trade partners to artificially weaken their currency to gain a trade advantage.  Are you suggesting Thailand is deliberately weakening the THB?  I wish they would...:-)

The other way around.

[dave moir]

2 hours ago, RichardColeman said:

That's not strictly speaking true. You seriously have to watch the baht/£ daily. The problem is that when £ has good news and spikes, it only spikes for say 8 hours, then back to normal or lower, on the other hand when the £ has bad new it tanks against the baht and does not come back after 8 hours, but lingers in the outhouse for days !

So true

 

[BonMot]

4 hours ago, charmonman said:

If they want the international tourism sector to ever recover, a lower baht would not be a bad thing.

Good for export too but it's not that simple.

 

Besides, no smart people will be on international holidays unless uber wealthy. The rest just lonely sex pests as I see now on BTS.

 

World economy is heading right into the toilet.

 

[crazykopite]

5 hours ago, sammieuk1 said:

My concern for the Thai Baht is you never get enough of them for a £ and probably never will again ????

When I arrived in Thailand in 2005 I was getting over 74 baht to the £ now it’s 42 it has to be one of the most manipulated currencies in the world one day thenThai economy will go belly up this government will be found out and I don’t think we have to wait to long before we see it happening 

[RichardColeman]

1 hour ago, superal said:

A recent TV money programme from the UK , forecast a dollar collapse in the 4th quarter

coinciding with Biden losing the house and senate ? 

[Thingamabob]

4 hours ago, Bim Smith said:

Raising interest rates will have little to no effect to what's coming. The truth is the debt bubble is way too high for all countries. Interesting to note that Thailand has, since 2019 been building it's foreign currency and gold reserves to an historical high according to World Bank data which is also used as a tool to prop up the value of the baht. It's like they knew they would be closing the country for two years. Where they get the money from to do that is anyone's guess. But this pushing for an interest rate rise will do nothing. The global crash is coming and in my opinion is more by design than some unfortunate accident. Hold on to your hats. And wallets. Digital IDs passes and wallets are inevitable.

....'Where they get the money from to do that is anyone's guess'....They get it from the country's largest earner which is never recorded or reported anywhere.

[ivor bigun]

3 hours ago, RichardColeman said:

That's not strictly speaking true. You seriously have to watch the baht/£ daily. The problem is that when £ has good news and spikes, it only spikes for say 8 hours, then back to normal or lower, on the other hand when the £ has bad new it tanks against the baht and does not come back after 8 hours, but lingers in the outhouse for days !

And that is why as soon as the pound spikes a bit i phone home and get my daughter transfer on wise straight away????

[sandyf]

4 hours ago, Swampy999 said:

Thailand has been on the US currency manipulation watch list for quite some time, I would assume they understand a lot more about currency manipulation than you ????????

The US seems to think it has a god given right to interfere in other countries affairs, world leaders in manipulation.

 

[Pattaya Spotter]

5 hours ago, sammieuk1 said:

My concern for the Thai Baht is you never get enough of them for a £ and probably never will again ????

Maybe your concern should be the £ and not the B ????

[Burma Bill]

5 hours ago, sammieuk1 said:

My concern for the Thai Baht is you never get enough of them for a £ and probably never will again ????

Sadly, yes. The best rate I ever got, for a short period only in the late 1990's, was 89 Baht for 1 GBP!!

[BumGun]

4 hours ago, Swampy999 said:

Thailand has been on the US currency manipulation watch list for quite some time, I would assume they understand a lot more about currency manipulation than you ????????

That's naive...The biggest currency manipulator is the US. The list is political

 

Switzerland and Vietnam and China and...   and a host of others were on it but that was Trumps shenanigans, currently

 

https://www.aljazeera.com/economy/2021/4/16/us-removes-vietnam-switzerland-from-currency-manipulator-list

 

In its semi-annual report to Congress on currency manipulation, the first under the Biden administration, the US Treasury Department said that no country currently meets the US criteria as a manipulator.

[sandyf]

39 minutes ago, crazykopite said:

When I arrived in Thailand in 2005 I was getting over 74 baht to the £ now it’s 42 it has to be one of the most manipulated currencies in the world one day thenThai economy will go belly up this government will be found out and I don’t think we have to wait to long before we see it happening 

It is called "recovery" but that may not be in your vocabulary. The rate was 41.19 on 1st May 1997 just prior to the crash the pushed the rate to high levels you are on about.

Thailand did quite well to get the rate back to what it was in about 20 years.

[nauseus]

3 hours ago, jacko45k said:

And a weaker currency relative to the USA$ would increase them further. 

The USA increasing interest rates has impacted gas prices, forcing them higher outside the US.  Even if crude prices remain unchanged, prices outside the USA will rise. 

 

Fuel is up due to (1) US domestic production (down) policy, (2) consumption normalizing post Covid and now (3) the war in Europe. Oil was way up long before the US Fed put in this mammoth 0.5% rate rise! Rate rises are generally applied to fight inflation, which is at a 40 year high (and still rising),in the US but the Fed is way behind this sharp curve.  

 

It looks like an extended period stagflation will affect the US, with similar in Europe and maybe a bit less hitting much of the rest of the world.