Rising Baht Sparks Fears of Another 'Tom Yam Kung' Crisis

[CallumWK]

3 minutes ago, chiang mai said:

Credit card companies such as Visa and Mastercard perform currency netting of the countries debits and credits via the central bank on a daily basis. That means they use inbound currency transactions to offset outbound currency transactions of similar currencies. Visa does not rush out and buy 7,000 baht, just to settle Fred's hotel bill!

 

Which means, at the end of the day still foreign currency is used to buy the Thai baht they use to pay the local supplier.

 

Doesn't matter if that was done today, yesterday or last month.

[chiang mai]

Just now, CallumWK said:

 

Which means, at the end of the day still foreign currency is used to buy the Thai baht they use to pay the local supplier.

 

Doesn't matter if that was done today, yesterday or last month.

I didn't say that none was purchased, only that the amount relative to that derived from exports is small.

[Purdey]

37 minutes ago, Karma80 said:

The US Dept of Treasury believes Thailand is worthy of being on the currency manipulation watch list https://en.wikipedia.org/wiki/Currency_manipulator
 

How effective that manipulation is is up for debate. I imagine not very is the real answer.

Thanks. It appears that since December 2020, Thailand had manipulated its currency. However, they were supposed to manipulate it to be weaker so I guess you are right - unsuccessful manipulation.

Edited September 30 by Purdey
Typo

[LoudHailer]

- Asian and other currencies, like the Australian dollar, are strengthening against the dollar across the board as market watchers see a potential rate cut by the U.S. Federal Reserve paving the way for Asian central banks to do the same. A rising tide lifts all boats. It's not confined to the Thai baht. 

[GammaGlobulin]

This should never be thought of as a...."crisis", as long as there is always plenty of Tom Yum Kung to go around....

 

 

I vividly recall the crisis while watching from Taipei.

I think the Baht should first go to 24 to the dollar.....

Every once in a while, we need a minor shock in order to put us straight again.

 

But for me, the price of a bowl of shrimp soup will always be within reach....if I remain in Thailand.

 

 

 

[Peterphuket]

What also surprise me is that the Thai gold-price, which is of course linked to the Thai baht, remains so low compared to the international gold price.

[Jerry777]

As soon as the Taksin family gets there next load out of Thailand to a safer currency it will calm down.

[PingRoundTheWorld]

5 hours ago, chiang mai said:

Tourism is 12% of GDP on a good day, exports is around 60%.

Again with this lie. These are "on the books" numbers, but the reality is that the majority of tourism spending isn't on the books. Anything from street vendors to tuk tuk drivers to hookers - these constitute a massive chunk of the economy that isn't "on the books" because nobody reports it. What tourists spend in hotels and reputable establishments isn't the majority of spending - nightlife and other unreported income is. In reality Thailand's GDP is probably more like 30% tourism, if not more.

 

If you have any doubts - just look what happened during Covid when there was no tourism - millions unemployed back to their villages, richest province in the country (because tourism!) - Phuket - on it's knees, basically a ghost town. Manufacturing is nice, but there are cheaper options for that (Vietnam, even if we ignore China) so it's not the future of Thailand - nor should it be. Thailand should aspire for tourism and higher tech as a future, not manufacturing. Of course they won't, but that's another story.

[PingRoundTheWorld]

1 hour ago, black tabby12345 said:

Already happened in a country like Japan.

While their Yen was a lot stronger, their factories left own country.

By now, 40% of the manufactures are now outside their home

And the Yen circling the toilet down 40%...

 

Might actually bring some production back home there, maybe.

[PingRoundTheWorld]

1 hour ago, chiang mai said:

Tourists typically book and pay using credit cards, many in advance from their home country. Visa/MasterCard settles their accounts with the supplier in local currency, not by remitting foreign currency for the supplier to exchange at the bank. Those who book packages pay the tour company in their home country, who in turn pay suppliers in local currency. Granted, backpackers and FITS will exchange currency in country

Even if this were true (which I'm not sure) - how do you think Visa/MasterCard would get the baht needed to settle the accounts? they'd have to exchange foreign currency to buy the baht. There isn't some magic where foreign currency is magically turned into baht by the CC companies - they'd have to buy (exchange) currency to have local funds to settle.

[chiang mai]

10 minutes ago, PingRoundTheWorld said:

Even if this were true (which I'm not sure) - how do you think Visa/MasterCard would get the baht needed to settle the accounts? they'd have to exchange foreign currency to buy the baht. There isn't some magic where foreign currency is magically turned into baht by the CC companies - they'd have to buy (exchange) currency to have local funds to settle.

Visa international nets inbound and outbound currency transactions globally and styles using offsets via central banks. Little need for them to buy much currency at all when different customers on different countries do that for them.

[black tabby12345]

20 minutes ago, PingRoundTheWorld said:

And the Yen circling the toilet down 40%...

 

Might actually bring some production back home there, maybe.

 

Factories rebuild in Japan is highly unlikely.

Those industrial plants were all demolished and reduced to the flat land.

To bring them back, it will cost them tens of billions(or more).

Japan's work force is also rapidly shrinking; can never have enough hands to regain yesteryears' industrial prestige.

 

Edited September 30 by black tabby12345

[outsidetrader]

11 hours ago, webfact said:

 

Thailand - Prachai Leophairat, CEO of TPI Polene Public Company Limited, expressed concern over the rising value of the Thai baht and its potential economic impact, drawing parallels to the 1997 "Tom Yam Kung" crisis.

 

Prachai outlined 11 key risks associated with the strong baht. He emphasized that if the U.S. dollar's interest rate falls while Thailand's baht interest rate rises, the baht will appreciate.

 

A 10% increase in the baht’s exchange rate combined with a 10% decrease in the dollar will raise production costs by 20%. This cost hike would make Thai products 20% more expensive than competitors, leading to a decline in primary goods and forcing secondary and tertiary industries to halt production.

 

The potential consequences include:

 

1. Factory closures
2. Rising unemployment
3. Reduced consumer spending
4. Halted industrial investments
5. Increased household and business debt
6. Higher bank loan costs due to rising bad debt reserves
7. Banks limiting loans to struggling businesses
8. Reduced government tax revenues and budget cuts
9. Lower government spending
10. A shrinking GDP
11. Declining foreign currency reserves
     

Prachai warned that if exports don't increase and factories continue to close, Thailand might face a shortage of foreign currency reserves. This could lead to a repeat of the 1997 crisis, leaving the country vulnerable to foreign exploitation of its assets, reported Naew Na.

 

Top: FILE photo

 

-- 2024-09-30

 

 

All of that and more til Taksin and his buddys <deleted> off . Thailand is,powerless to fight back ,if it does ,then Bang Bang ...

Ime hedging with gold bars ,silvdr and gold funds buying in baht .

[John Drake]

5 minutes ago, outsidetrader said:

Ime hedging with gold bars

 

Or tungsten???

[connda]

11 hours ago, webfact said:

This could lead to a repeat of the 1997 crisis, leaving the country vulnerable to foreign exploitation of its assets, reported Naew Na.

Where's Soros?

[connda]

1 hour ago, Celsius said:

The article is spot F on...0

 

It smells exactly like when a stock or crypto goes up when a select few want to exit.

 

The Thai economy is in extremely bad shape. The problem here is that most AN posters have gone completely local and believe the BS institutions feed them..

 

 

Yep!

[kevin612]

The fed lowered the interest rate, but somehow the baht increase 10 percent, this is ridiculous 

[PingRoundTheWorld]

41 minutes ago, chiang mai said:

Visa international nets inbound and outbound currency transactions globally and styles using offsets via central banks. Little need for them to buy much currency at all when different customers on different countries do that for them.

True, but once the equilibrium is out of balance and there's much more demand for one currency than transactions from that country, they do have to buy, in extreme situations, which is what we're considering here.

[PingRoundTheWorld]

43 minutes ago, black tabby12345 said:

 

Factories rebuild in Japan is highly unlikely.

Those industrial plants were all demolished and reduced to the flat land.

To bring them back, it will cost them tens of billions(or more).

Japan's work force is also rapidly shrinking; can never have enough hands to regain yesteryears' industrial prestige.

 

Probably true. Also Japan workforce is still more expensive than others. Higher tech maybe, but not low tech.

[chiang mai]

2 minutes ago, PingRoundTheWorld said:

True, but once the equilibrium is out of balance and there's much more demand for one currency than transactions from that country, they do have to buy, in extreme situations, which is what we're considering here.

I don't deny that is true and never have, they almost certainly do buy some currencies at different points. What I said, which everyone seems to have ignored, is not that Visa doesn't buy currency but that exports provides the vast majority of foreign currency for Thailand, substantially more than tourism ever could.

[PingRoundTheWorld]

25 minutes ago, kevin612 said:

The fed lowered the interest rate, but somehow the baht increase 10 percent, this is ridiculous 

It makes perfect sense that the baht would appreciate vs the Dollar when the Fed cut rate and BOT did not. However what doesn't make sense is why the BOT did not cut rates - Thai inflation is well below the target inflation (%1-3). They should've cut rates even before the Fed did, and now even more so than before. If they don't they'll be essentially sending Thailand into deflation.

[PingRoundTheWorld]

3 minutes ago, chiang mai said:

I don't deny that is true and never have, they almost certainly do buy some currencies at different points. What I said, which everyone seems to have ignored, is not that Visa doesn't buy currency but that exports provides the vast majority of foreign currency for Thailand, substantially more than tourism ever could.

I understand, but disagree. I mean- I agree exports is bigger than tourism, but when you combine tourism+expat inflows+European simps sending money to isaan 🤣+grey purchases not on the books (prostitution, nightlife, tuk/taxis, street vendors, anyone that doesn't declare) then it's still a huge chunk of the pie.

[Burma Bill]

11 hours ago, webfact said:

the 1997 "Tom Yam Kung" crisis.

 

 

GREAT! 

At that time I was getting 89 baht for one UK pound! 

 

[Caldera]

I think the strong baht in combination with China flooding the world markets with cheap products across all major industries is quite an explosive package for Thailand, already not blessed with a particularly productive workforce or competitive companies.

 

It has the potential to seriously cripple Thailand's exports, and the icing on the cake is that tourism will also suffer as a holiday in Thailand has already become quite a bit more expensive for many.

[chiang mai]

22 minutes ago, PingRoundTheWorld said:

I understand, but disagree. I mean- I agree exports is bigger than tourism, but when you combine tourism+expat inflows+European simps sending money to isaan 🤣+grey purchases not on the books (prostitution, nightlife, tuk/taxis, street vendors, anyone that doesn't declare) then it's still a huge chunk of the pie.

You appear to not understand what GDP is....it is the sum of ALL final goods and services that are sold, whether declared or not, visible to all or not.  That means all the things you mentioned are already included.

 

There are three ways to measure GDP and one of them is the value of all purchases. Thailand specifically does not use this method because the numbers are unreliable, the same thing you allude to. But id doe use the other two methods in tandem, for different parts of the economy. One is end value purchases and the other is what is produced. Between them they capture everything that is going on in the economy, even the grey market because purchases are measured.

[artotle]

There are so many experts here I wonder if they will grant me my unfinished economics degree in Finland when I tell them I've read AseanNOW forums almost daily for contemporary lessons. 

[Jenkins9039]

10 hours ago, chrisbangkok said:

The Thai banking system is all about flooding easy loans and high debts thus ensuring it can repossess and sell on at 50% value and maintaining the rich elite

Not sure where you get that from.

 

1) When they <deleted> up in investing in UK Steel, they increased costs in Thailand for banking facilities to write off the debt hence there was fee(s) associated with card withdrawals (increases) from non domestic bank cards (as an example but there were many.

2) When they repo a property/asset they allow it to sit on their books rather than reduce (trust me i tried to buy a repo property that had a tree growing through it.

 

3) They spin out bad debt into new entities opposed to having it sit on their balance sheet bringing it down (hence SCB pushing CC into CardX).

[Skeptic7]

Hope so❗

[Graham8888]

6 hours ago, Moneyhonour said:

This weekend I read in the bangkok post that India will sell  their overstock Basmati Rice in their full stocked warehouses to the world market for very low prices. As for Thailand with the upcoming Rice harvesting season this Will be a disaster. The crisis Will appear sooner than we think.

We only use thai rice - how many restaurants, supermarkets around the world can substitute jasmine rice for basmati rice?

[Enzian]

1 hour ago, PingRoundTheWorld said:

It makes perfect sense that the baht would appreciate vs the Dollar when the Fed cut rate and BOT did not. However what doesn't make sense is why the BOT did not cut rates - Thai inflation is well below the target inflation (%1-3). They should've cut rates even before the Fed did, and now even more so than before. If they don't they'll be essentially sending Thailand into deflation.

Is it possible the BOT is not concentrating on inflation, but rather on discouraging borrowing and reducing the amount of household debt--something that the banks themselves should be doing through their underwriting practices but aren't doing very well? Also, higher--or rather, historically normal--rates should encourage saving in preference to consumption, which would improve household balance sheets. I can't see these current rates leading to deflation; I suspect it would take stronger medicine for that.