Foreign currency deposits surge in Thailand

[BenStark]

7 minutes ago, Mike Lister said:

The Chinese have to settle many of their trade bills in USD also and when your currency is so weak, that becomes expensive.

 

SCB and Krungsri aren't Chinese banks, and they are among the few that offer this elevated rate.

[Mike Lister]

1 minute ago, BenStark said:

 

SCB and Krungsri aren't Chinese banks, and they are among the few that offer this elevated rate.

Banks collect currencies for different reasons, perhaps it's a strategic investment whilst USD is strong, perhaps it's an offset against other borrowings, again, dunno.

[BenStark]

The pattern I think to see is that all banks offering this high interest are linked to a government, Thai or foreign

[Mike Lister]

Just now, BenStark said:

The pattern I think to see is that all banks offering this high interest are linked to a government, Thai or foreign

I think a simpler explanation is that the banks Treasury departments forecast that THB will weaken further against USD which will offset the interest that they have to pay to customers. Complex conspiracy theories are rarely correct.

 

 

 

 

[BenStark]

2 minutes ago, Mike Lister said:

I think a simpler explanation is that the banks Treasury departments forecast that THB will weaken further against USD which will offset the interest that they have to pay to customers. Complex conspiracy theories are rarely correct.

 

 

 

 

 

If the Thai baht weakens further, the interest cost increase, not?

[Mike Lister]

3 minutes ago, BenStark said:

 

If the Thai baht weakens further, the interest cost increase, not?

What interest cost, interest on what?

 

Ah, understand, you refer to interest rate on USD.

 

If THB weakened, it would have no bearing on USD value, that is determined by none THB and non Thai factors, mostly the US Fed rate.

[BenStark]

1 minute ago, Mike Lister said:

What interest cost, interest on what?

 

They receive USD, and have to pay interest on those USD.

 

If they have to pay 1 USD interest, which they have either to pay in USD or THB, it cost them more when the baht is weak

[Mike Lister]

1 minute ago, BenStark said:

 

They receive USD, and have to pay interest on those USD.

 

If they have to pay 1 USD interest, which they have either to pay in USD or THB, it cost them more when the baht is weak

Interest is paid in the currency of the deposit, interest on USD accounts is paid in USD. 

 

When a bank takes a deposit, it doesn't sit on it, the bank immediately deploys it into some form of investment that earns the bank a greater amount than they are required to pay to the customer in interest. The income they receive on their USD investment will be paid in USD, just as they have to pay out to the customer. That is known as matching of assets and liabilities, at which banks are well practiced. They will not be phased by any weakening of THB in respect of their USD holdings but they will probably offload them when THB strengthens.

 

[BenStark]

4 minutes ago, Mike Lister said:

Interest is paid in the currency of the deposit, interest on USD accounts is paid in USD. 

 

When a bank takes a deposit, it doesn't sit on it, the bank immediately deploys it into some form of investment that earns the bank a greater amount than they are required to pay to the customer in interest. The income they receive on their USD investment will be paid in USD, just as they have to pay out to the customer. That is known as matching of assets and liabilities, at which banks are well practiced. They will not be phased by any weakening of THB in respect of their USD holdings but they will probably offload them when THB strengthens.

 

 

If it was all that easy, then I wonder why not every bank offers those special interests,

 

Not so long ago you posted that interest in the US would come down by up to 2%, and that this was a fact as certain as life.

 

So your theory is a bit flawed I'm afraid

Edited March 6 by BenStark

[Mike Lister]

Just now, BenStark said:

 

If it was all that easy, then I wonder why not every bank offers those special interests

Risk. Getting involved in foreign currencies involves a risk that can be significant, the Thai government learned that lesson in 1997! That is why today, the government borrows less than 4% of it's total debt, in currencies other than THB. Ditto banks, unless you are a global bank that can deploy currency assets into overseas branches, holding currencies can be dangerous for the balance sheet because the exchange rate can shift and the transaction begins to show a loss, even if you haven't done anything apart from collect decent levels of income. All of which partially explains why the banks listed in ExpatOilworkers spreadsheets are mainly only holding major reserve currencies.

[BenStark]

6 minutes ago, Mike Lister said:

Risk. Getting involved in foreign currencies involves a risk that can be significant, the Thai government learned that lesson in 1997! That is why today, the government borrows less than 4% of it's total debt, in currencies other than THB. Ditto banks, unless you are a global bank that can deploy currency assets into overseas branches, holding currencies can be dangerous for the balance sheet because the exchange rate can shift and the transaction begins to show a loss, even if you haven't done anything apart from collect decent levels of income. All of which partially explains why the banks listed in ExpatOilworkers spreadsheets are mainly only holding major reserve currencies.

 

Which brings us back to the question, why are it all government related banks that offer the high interest, and in addition, why does the government consider issuing a USD dominated bond?

 

Could it be because the claimed USD reserves aren't really there. There has been speculation about this for a few years already, but of course the Thai government cooking the books isn't a possibility.

[Mike Lister]

1 hour ago, BenStark said:

 

Which brings us back to the question, why are it all government related banks that offer the high interest, and in addition, why does the government consider issuing a USD dominated bond?

 

Could it be because the claimed USD reserves aren't really there. There has been speculation about this for a few years already, but of course the Thai government cooking the books isn't a possibility.

 

BOT isn't under the control government, the gov can't access the reserves.

[Will B Good]

Getting over 10% back home, so Thailand won't be seeing any of my pennies.

[Gknrd]

59 minutes ago, Will B Good said:

Getting over 10% back home, so Thailand won't be seeing any of my pennies.

Yea, same here. When I lived there I kept my money growing in the US. I am one of the ones that left after they forced the 800K in the bank. Regardless my money grew by leaps and bounds in the 10+ years I lived in Thailand. 

[Gknrd]

12 hours ago, Mike Lister said:

Of course that is what the effect is of moving the currency out of China, my question was however, why would RMB want to buy THB when it could buy lots of other alternatives with a higher rate of return.

 This capital flight is from people desperate to get their money out. Once in Thailand it can be transferred out much easier. This is just capital flight from despirate people. Thailand is close and must be easier to get the cash out and into a Thai bank. Whether it stays there is another question.

 If it gets to be a big problem the CCP will clap down on it with Thailand. Thailand is in China's pocket. I would be getting my money out of Thailand as fast as possible.

Edited March 6 by Gknrd

[Mike Lister]

15 minutes ago, Gknrd said:

 This capital flight is from people desperate to get their money out. Once in Thailand it can be transferred out much easier. This is just capital flight from despirate people. Thailand is close and must be easier to get the cash out and into a Thai bank. Whether it stays there is another question.

 If it gets to be a big problem the CCP will clap down on it with Thailand. Thailand is in China's pocket. I would be getting my money out of Thailand as fast as possible.

I don't agree with the last part of what you wrote. Thailand needs its export partners, the US and Europe, any risk to the banking system or client capital will jeopardise that. When it comes to pollical alliances, Thailand is very good at sitting on the fence and keeping everyone happy.

[Gknrd]

8 minutes ago, Mike Lister said:

I don't agree with the last part of what you wrote. Thailand needs its export partners, the US and Europe, any risk to the banking system or client capital will jeopardise that. When it comes to pollical alliances, Thailand is very good at sitting on the fence and keeping everyone happy.

Hope you are right. Time will tell.