The baht feels the weight of strengthening US dollar

[webfact]

 

By Thai PBS World’s Business Desk

 

The Bank of Thailand (BOT) has been facing the delicate task of navigating the baht and the economy through turbulent waters. 

 

As the government has apparently almost run out of tricks to jump-start the economy due to the high debt it is saddled with, the responsibility has fallen on the central bank as well.

 

The recent move by the central bank to hike the key policy rate by 0.25 percentage points to 1 percent has, however, made some analysts wonder if the BOT’s actions were too little to stem the rapid depreciation of the baht.

 

This has been caused by the widening gap between the benchmark rates of Thailand and the US, as the US Federal Reserve has aggressively raised its federal funds rate to a range of 3-3.25 percent.

 

The Thai stock market has been subjected to high volatility like the global equity market.

 

The sliding baht fell to below 37 to the US dollar, a key psychological barrier, raising speculation that it could further weaken to 40 per dollar.

 

Full story: https://www.thaipbsworld.com/the-baht-feels-the-weight-of-strengthening-us-dollar/

 

-- © Copyright Thai PBS 2022-10-12

 

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[talahtnut]

Its a manipulated Dollar, when Putin wins or negotiates

peace, watch the mighty Dollar reaction.

[BonMot]

BOT has spent billions of dollars and reserves defending THB. Stupid. More stupidity to come.

 

I see 42-43/USD

 

Thailand will crash it's economy raising interest rates. It's well argued the US will crash it's economy raising interest rates.

 

Enjoy the ride.

[2baht]

Way way too high!

[nigelforbes]

1 hour ago, BonMot said:

BOT has spent billions of dollars and reserves defending THB. Stupid. More stupidity to come.

 

I see 42-43/USD

 

Thailand will crash it's economy raising interest rates. It's well argued the US will crash it's economy raising interest rates.

 

Enjoy the ride.

The stock market is not the economy.

[RichardColeman]

1 hour ago, BonMot said:

BOT has spent billions of dollars and reserves defending THB. Stupid. More stupidity to come.

I agree, but then you could argue the stupidity of the current US politicians allowing the US dollar to go so high because of their stupid money spending policies and crashing all other currencies !

[TooMuchTime]

Nothing more beautiful than seeing countries worldwide printing money to keep buying the almighty USD.  Your downfall is my gain.

[itsari]

23 minutes ago, TooMuchTime said:

Nothing more beautiful than seeing countries worldwide printing money to keep buying the almighty USD.  Your downfall is my gain.

Countries are selling there dollar reserves to support there own currency . Your downfall is your ignorance of what is happening 

[nigelforbes]

BOT's got a really difficult choice to make. If it raises interest rates further/faster it risks making exports less competitive, disincentives overseas tourists and increases the cost of consumer loans, all of which are major threats to the economy. 

 

If it leaves the interest rates low that means imports become more expensive, not only oil but also the other components that are inputs to the manufacturing process which are then exported again. 

 

The US Fed Terminal Rate is currently 4.9% but that will surely rise. The BOT rate is currently 1%, the gap is huge

 

Leaving rates low(ish) gets my vote, trying to track the Fed even loosely is folly. Ah yes you say, but expats want a weaker Baht, so do tourists. The problem is that foreign tourism is only about 10% of GDP and expats only about 3%, it's the other 97% of the economy that's really important.

 

 

Edited October 12, 2022 by nigelforbes

[Scott]

Off-topic post and reply reported and removed.

 

[Walker88]

3 hours ago, RichardColeman said:

I agree, but then you could argue the stupidity of the current US politicians allowing the US dollar to go so high because of their stupid money spending policies and crashing all other currencies !

I'm not sure your comment makes any sense.  Politicians have precious little to do with the dollar's rise. The Fed is an independent body, and it is the Fed that sets rates. Pols can scream at the Chairman, but he is under no obligation to listen to them.

 

Also, the money spending policies hardly make the dollar rise.

 

A number of things are responsible for the current blowoff top in the dollar. First is the US is not dependent on russian gas, so its near term prospects are better than the EU. Second, UE is at a multi-decade low, brought down to 3.5% from the 6.8% 45 left in his wake. Interest rate differentials---as the Fed raises rates---also favor the dollar. Other countries---Thailand included---have to be more cautious raising rates to keep up, as Household and corporate debt are massive after the debt-fueled "boom' from 2011-2019. Let's also toss in that markets tend to move in a direction that hurts the greatest number of people. Much of the world went to one side of the proverbial boat---believing the dollar could only go down. Believing that, companies were comfortable borrowing in dollars. That's all well and good until the dollar begins to rise. Dollar debtors then have to buy into a rising dollar market to get the $ they need to service their loans.

 

EVERY nation in the world is wildly indebted. Worldwide debt is approaching $300,000,000,000,000. The US may be the biggest sovereign debtor, but on a relative basis it is better off than some, including Japan. Other nations mask their debt by its presence at different levels, like States, Provinces and Municipalities. EVERY nation mortgaged its future. What the US might have going for it is its relative energy independence, its diverse and robust economy, its military strength, the size of its financial markets and ease of entry/exit, and the relative strength of its banking system after the moves Obama made post 2008 (reduce leverage, sell off bad debt, issue new equity), which is the polar opposite of what Europe did. (Europe printed money, gave it to banks, then told banks to buy sovereign debt of EU nations----that lowered rates for sovereign borrowers and manufactured capital for banks,, but they're interdependent; if EU rates rise, all that manufactured bank capital falls in value and makes the NPLs in a banking system that is 3x EU GDP---vs .8x in the US---an issue again.)

 

The next few years in the world are likely to be quite ugly, as the combo of the worldwide debt bubble and climate change will hit everything from employment to food production. The dollar's current meteoric rise is a harbinger.

[hotchilli]

7 hours ago, webfact said:

The recent move by the central bank to hike the key policy rate by 0.25 percentage points to 1 percent has, however, made some analysts wonder if the BOT’s actions were too little to stem the rapid depreciation of the baht.

Next year probably most countries are going to be in recession, the depreciating baht might be a good thing for trade and tourism.

[Cake Monster]

3 hours ago, nigelforbes said:

BOT's got a really difficult choice to make. If it raises interest rates further/faster it risks making exports less competitive, disincentives overseas tourists and increases the cost of consumer loans, all of which are major threats to the economy. 

 

If it leaves the interest rates low that means imports become more expensive, not only oil but also the other components that are inputs to the manufacturing process which are then exported again. 

 

The US Fed Terminal Rate is currently 4.9% but that will surely rise. The BOT rate is currently 1%, the gap is huge

 

Leaving rates low(ish) gets my vote, trying to track the Fed even loosely is folly. Ah yes you say, but expats want a weaker Baht, so do tourists. The problem is that foreign tourism is only about 10% of GDP and expats only about 3%, it's the other 97% of the economy that's really important.

 

 

I am seeing already a knock on effect of the Dollar against the Baht in my Region, and in some cases a double whammy due to the slowdown in China also.

The Factories are slowing significantly.

My Wife has a few Dormitory Apartments that are rented out to the Factory Workers.

In the last Month, one guy has been laid off, there are 2 more rooms with 4 people on short time working and there is a constant flow of mail from Banks and Loan Companies to most of the other Rooms.

We have also had visits from Banks looking for people that previously rented, departed, and then used the address for Loan applications

Imports being more Expensive is a huge problem, as 60 % of the Countries Electricity is generated using Gas

[nigelforbes]

2 minutes ago, Cake Monster said:

I am seeing already a knock on effect of the Dollar against the Baht in my Region, and in some cases a double whammy due to the slowdown in China also.

The Factories are slowing significantly.

My Wife has a few Dormitory Apartments that are rented out to the Factory Workers.

In the last Month, one guy has been laid off, there are 2 more rooms with 4 people on short time working and there is a constant flow of mail from Banks and Loan Companies to most of the other Rooms.

We have also had visits from Banks looking for people that previously rented, departed, and then used the address for Loan applications

Imports being more Expensive is a huge problem, as 60 % of the Countries Electricity is generated using Gas

It's easy to blame the Dollar for those things but there's a good chance they may result from other things instead/also. Broken supply chains still proliferate plus China's is still in lockdown hence trade with them is being hampered, Then we have flooding, the effects of which will trickle through and be felt at some point. From memory I recall that THB versus other currencies is largely the same as before, it's just THB and other currencies against USD that's the problem. Given that China is very nearly Thailand's largest trading partner, combined with the lower cost of US imports from Thailand, my guess is that the strength of USD is not the root cause of the problems you mention.....just a guess however.

[Iamfalang]

For MONTHS, I've been telling people this is coming.... 100% certainly.    Hopefully you are all my followers and will prostate yourself when I walk by....

 

just check my posts and frame them or get all my messages tattooed on your body.....as what I say is truth.

 

The baht will 100% continue to get weaker.

 

I've gotten so rich that I don't care if this is all a big scam scam scam fake fraud scam scam......I'm not a bag holder.

 

just get rich and hand out tissues to the poor who think they know

[cdemundo]

I like it.

40 baht to the dollar was the exchange rate when I first visited Thailand,

if it gets to that point again I won't complain.

 

I do wonder about:

"The sliding baht fell to below 37 to the US dollar, a key psychological barrier, raising speculation that it could further weaken to 40 per dollar."

 

If multiple factors determine the exchange rate, whose psychology is at play in passing a psychological barrier?

Not a rhetorical question, I really wonder about this.

Edited October 12, 2022 by cdemundo

[KhunLA]

3 minutes ago, cdemundo said:

I like it.

40 baht to the dollar was the exchange rate when I first visited Thailand,

if it gets to that point again I won't complain.

 

I hear that, ditto for me, Sept 2000, it was bouncing around 40, actually went to 45 for a short period, before hitting low of < 30 more than a few times ????

 

Really nice being back above 35.

Edited October 12, 2022 by KhunLA

[Neeranam]

5 minutes ago, cdemundo said:

I like it.

40 baht to the dollar was the exchange rate when I first visited Thailand,

if it gets to that point again I won't complain.

 

I will be doing cartwheels as I get paid in US$. It was 25 baht to the $ when I moved here. 

[nigelforbes]

6 minutes ago, cdemundo said:

I like it.

40 baht to the dollar was the exchange rate when I first visited Thailand,

if it gets to that point again I won't complain.

 

I do wonder about:

"The sliding baht fell to below 37 to the US dollar, a key psychological barrier, raising speculation that it could further weaken to 40 per dollar."

 

If multiple factors determine the exchange rate, whose psychology is at play in passing a psychological barrier?

Not a rhetorical question, I really wonder about this.

The answer is that it's a FOREX issue. The more a currency is sold against USD, the weaker that currency becomes - the more USD is purchased, using other currencies, the stronger USD becomes. In times of economic and geopolitical uncertainty people buy the key Reserve Currency, which is USD. The psychology at play currently is that the US FED will keep increasing interest rates in order to tame inflation, that means investors will get a better return on USD than other currencies and imports priced in USD will cost the holders of other currencies more. When inflation dips, expect USD to weaken, at some point normal service will be resumed.

[bobbin]

1 hour ago, Walker88 said:

I'm not sure your comment makes any sense.  Politicians have precious little to do with the dollar's rise. The Fed is an independent body, and it is the Fed that sets rates. Pols can scream at the Chairman, but he is under no obligation to listen to them.

 

Also, the money spending policies hardly make the dollar rise.

 

A number of things are responsible for the current blowoff top in the dollar. First is the US is not dependent on russian gas, so its near term prospects are better than the EU. Second, UE is at a multi-decade low, brought down to 3.5% from the 6.8% 45 left in his wake. Interest rate differentials---as the Fed raises rates---also favor the dollar. Other countries---Thailand included---have to be more cautious raising rates to keep up, as Household and corporate debt are massive after the debt-fueled "boom' from 2011-2019. Let's also toss in that markets tend to move in a direction that hurts the greatest number of people. Much of the world went to one side of the proverbial boat---believing the dollar could only go down. Believing that, companies were comfortable borrowing in dollars. That's all well and good until the dollar begins to rise. Dollar debtors then have to buy into a rising dollar market to get the $ they need to service their loans.

 

EVERY nation in the world is wildly indebted. Worldwide debt is approaching $300,000,000,000,000. The US may be the biggest sovereign debtor, but on a relative basis it is better off than some, including Japan. Other nations mask their debt by its presence at different levels, like States, Provinces and Municipalities. EVERY nation mortgaged its future. What the US might have going for it is its relative energy independence, its diverse and robust economy, its military strength, the size of its financial markets and ease of entry/exit, and the relative strength of its banking system after the moves Obama made post 2008 (reduce leverage, sell off bad debt, issue new equity), which is the polar opposite of what Europe did. (Europe printed money, gave it to banks, then told banks to buy sovereign debt of EU nations----that lowered rates for sovereign borrowers and manufactured capital for banks,, but they're interdependent; if EU rates rise, all that manufactured bank capital falls in value and makes the NPLs in a banking system that is 3x EU GDP---vs .8x in the US---an issue again.)

 

The next few years in the world are likely to be quite ugly, as the combo of the worldwide debt bubble and climate change will hit everything from employment to food production. The dollar's current meteoric rise is a harbinger.

Thank you for a well-explained post.

[Caldera]

Crumble, crumble, little baht... I for one want to see more of it!

Edited October 12, 2022 by Caldera

[Neeranam]

I am paid in US$, which is transferred to baht, then immediately transferred to Bitcoin. This has done me well for the last 6 years. 

[AnotherFarang8]

A number of largest Asian countries have either stopped buying usd denominated debt or are actively selling it to support national currencies. Next move will be a mass default on their own usd debts to get off the hook and restart/boost economies with no external pressure. Those dollars are going back home to roost to drive up inflation sky high. Many comments in this thread are delusional as to what is really happening.

[bangon04]

6 hours ago, nigelforbes said:

Ah yes you say, but expats want a weaker Baht, so do tourists. The problem is that foreign tourism is only about 10% of GDP and expats only about 3%, it's the other 97% of the economy that's really important.

 

 

"The problem is that foreign tourism is only about 10% of GDP"

 

Other percentages are available..... Estimates do vary......

[nigelforbes]

1 hour ago, bangon04 said:

"The problem is that foreign tourism is only about 10% of GDP"

 

Other percentages are available..... Estimates do vary......

Indeed there are, but none quite as accurate. 

 

"Tourism is one of the primary engines driving Thailand’s economy. In 2019, tourism sector accounted for 11% of the country's gross domestic product". (Note: this is domestic AND foreign)

 

https://www.bot.or.th/Thai/MonetaryPolicy/EconomicConditions/AAA/250624_WhitepaperVISA.pdf

 

 

Edited October 12, 2022 by nigelforbes

[bkk6060]

People with foreign pensions need to look at the big picture on this.  SInce your money is not being spent in your home country, you really are not affected with the current hyper inflation there.  Your money is worth 20% + here compared to a few years ago when it was 29-30 to USD compared to the current 38.  Inflation has hit here but much less as basic things generally cost less then the west.  

Edited October 12, 2022 by bkk6060

[herfiehandbag]

12 hours ago, nigelforbes said:

BOT's got a really difficult choice to make. If it raises interest rates further/faster it risks making exports less competitive, disincentives overseas tourists and increases the cost of consumer loans, all of which are major threats to the economy. 

 

If it leaves the interest rates low that means imports become more expensive, not only oil but also the other components that are inputs to the manufacturing process which are then exported again. 

 

The US Fed Terminal Rate is currently 4.9% but that will surely rise. The BOT rate is currently 1%, the gap is huge

 

Leaving rates low(ish) gets my vote, trying to track the Fed even loosely is folly. Ah yes you say, but expats want a weaker Baht, so do tourists. The problem is that foreign tourism is only about 10% of GDP and expats only about 3%, it's the other 97% of the economy that's really important.

 

 

I really don't understand currency fluctuations and what drives them. I fully admit, like Winnie the Pooh, to being a bear of very little brain when it comes to such matters.

 

However, when your summary of the situation suggests that if you take away 10% and 3%, you are left with 97%...

[nigelforbes]

49 minutes ago, herfiehandbag said:

I really don't understand currency fluctuations and what drives them. I fully admit, like Winnie the Pooh, to being a bear of very little brain when it comes to such matters.

 

However, when your summary of the situation suggests that if you take away 10% and 3%, you are left with 97%...

I used the expat element (3%) as the example since that is what this forum comprises I imagine, it's supposed to demonstrate the point rather than be a math exercise..  

[Neeranam]

2 hours ago, herfiehandbag said:

I really don't understand currency fluctuations and what drives them. I fully admit, like Winnie the Pooh, to being a bear of very little brain when it comes to such matters.

 

However, when your summary of the situation suggests that if you take away 10% and 3%, you are left with 97%...

Fiat is a centralised pyramid scheme flowing money from the bottom to the top, which are the bankers licensed to dilute the money supply and charge interest on it.

[BonMot]

17 hours ago, nigelforbes said:

The stock market is not the economy.

I never stated it was.