Thai Baht Hits 10 Year Record High Against US$

[Jai Dee]

Thai baht hits 10 year record high.

Thai baht hit the highest record in ten years as it opened Thursday morning at Bt33.01 to Bt33.02.

Currency traders attributed the rise to the US Federal Reserve's decision to cut the interest rate by another 50 basic points last night to 3 per cent, prompting certain speculators to buy Thai baht.

As a result, Thai policy rate is 25 basis point higher than the US rate.

Currency traders expected that if the US Federal Reserve further cut the interest rate again in March. The difference between Thai and the US rates will be higher. This may prompt much higher inflow of capital into Thai market. This could lead to further rise of Thai baht.

Source: The Nation - 31 January 2008

[Old Man River]

Thai baht hits 10 year record high.

Thai baht hit the highest record in ten years as it opened Thursday morning at Bt33.01 to Bt33.02.

Currency traders attributed the rise to the US Federal Reserve's decision to cut the interest rate by another 50 basic points last night to 3 per cent, prompting certain speculators to buy Thai baht.

As a result, Thai policy rate is 25 basis point higher than the US rate.

Currency traders expected that if the US Federal Reserve further cut the interest rate again in March. The difference between Thai and the US rates will be higher. This may prompt much higher inflow of capital into Thai market. This could lead to further rise of Thai baht.

Source: The Nation - 31 January 2008

Currency traders are hedging their statements when they say the higher THB rate than USD could lead to a further rise in the value of the THB. It isn't a "maybe", but rather a "definite". Given the sharp drop in USD rates, expect to see a drop in THB rates by the BOT regardless of whether the PPP lives up to their promise to abolish capital controls or not. While I doubt the PPP will honor their promise to abolish them now that they are elected and can do as they wish, if they do live up to their promise, short term THB interest rates would see an even greater fall to try and dissuade hot money from flowing into Thailand.

[BigSnake]

Guess will go even higher, darn, not good for those that have a dollors income(ie) U.S. Retirees

[Khun ?]

Soon they will need two wives with income to meet requirements. Wonder will thai familes

take care of disadvataged Americans!

[Jai Dee]

Thailand's Baht Rises Past 33, First Time Since August 1997

Thailand's baht advanced past 33 for the first time since August 1997 on speculation exporters are exchanging overseas earnings to guard against further weakness in the U.S. currency.

The baht headed for a weekly gain as the U.S. Federal Reserve lowered its benchmark rate twice last month. The dollar this week declined against all 10 most-active Asian currencies outside of Japan. Thailand's trade surplus was $1.07 billion in December, extending a monthly surplus since May 2007.

"Exporters are probably selling some of their dollars forward and that will have an impact on the baht spot market,'' said Irene Cheung, a strategist at ABN Amro Bank NV in Singapore. "You are seeing a combination of two forces on the baht, the dollar weakness and very strong balance of payments.''

The baht climbed 0.2 percent to 32.94 per dollar as of 10:40 a.m. in Bangkok and was set for a 0.4 percent gain this week, according to data compiled by Bloomberg. Offshore, the baht fell 0.5 percent to 31.47.

The currency may rise to 32.80 by the end of March and 32.20 by the end of June, Cheung said.

Fed policy makers reduced the target rate for overnight loans between banks by 50 basis points to 3 percent on Jan. 30. The Bank of Thailand kept its one-day bond repurchase rate at 3.25 percent at its Jan. 16 meeting.

The nation's current-account surplus was at $1.66 billion in December compared with a record $2.65 billion in November, the central bank said yesterday. Finance Minister Chalongphob Sussangkarn said this week the currency "is strengthening because the country continues to have a current-account surplus.''

"We are still seeing a stronger baht onshore, but not in a big way because the Bank of Thailand is managing it,'' ABN Amro's Cheung said. "Overall the trend is still for lower dollar-baht.''

Source: Bloomberg - 01 February 2008

[Rinrada]

The local guys on 180 Bt a day will be over the moon ....probably recon they are all millionaires....

[Ricardo]

The currency may rise to 32.80 by the end of March and 32.20 by the end of June, Cheung said.

...

"We are still seeing a stronger baht onshore, but not in a big way because the Bank of Thailand is managing it,'' ABN Amro's Cheung said. "Overall the trend is still for lower dollar-baht.''

Source: Bloomberg - 01 February 2008

So the market doesn't believe the PPP policy, to weaken the baht somehow, back to 35 against the dollar, will be achieved anytime soon ? Bad news for tourism & exporters. But imported-foods, for the average guy on 180 Baht/day, should get cheaper, so that's OK then.

[Pattaya46]

Hi Jai Dee,

Could you please change the title of this thread ? It is wrong because imprecise.

It's only a high record relative to US$, or rather a low record of the US$...

Many guys here are more concerned about Euro, not US$,

and in these last 2 years the baht moved between 46 and 53 bahts/€

Today it's about 49 baht/€, so neither a high, neither a low. So title is false.

Thank's

Pattaya46

[yeti]

Hi Jai Dee,

Could you please change the title of this thread ? It is wrong because imprecise.

It's only a high record relative to US$, or rather a low record of the US$...

Many guys here are more concerned about Euro, not US$,

and in these last 2 years the baht moved between 46 and 53 bahts/€

Today it's about 49 baht/€, so neither a high, neither a low. So title is false.

Thank's

Pattaya46

Agreed, title is misleading. Something like US$ Hits 10 Year Record Low would be better...

[Old Man River]

Hi Jai Dee,

Could you please change the title of this thread ? It is wrong because imprecise.

It's only a high record relative to US$, or rather a low record of the US$...

Many guys here are more concerned about Euro, not US$,

and in these last 2 years the baht moved between 46 and 53 bahts/€

Today it's about 49 baht/€, so neither a high, neither a low. So title is false.

Thank's

Pattaya46

Agreed, title is misleading. Something like US$ Hits 10 Year Record Low would be better...

While you are, of course, correct in that it only relates to the USD, since the majority of Thailand's exports are USD denominated, everyone understands that this is the USD/THB being discussed. If it was the USD/Euro or USD/Yen, while important it wouldn't have the impact on the country's exports that the USD/THB has. Note, I am not saying that the majority of Thailand's exports go to the US, only that the majority are USD denominated.

[yeti]

Note, I am not saying that the majority of Thailand's exports go to the US, only that the majority are USD denominated.

Well, in 2006 (2007 figures are not available yet) Thailand exports were: 16.1% towards ASEAN, 15% towards the USA, 13% towards the EC, 12.7% towards Japan. Even if some ASEAN exports were US$ denominated, I don't see how you can arrive to "the majority are USD denominated".

[xbusman]

Well here is the problem Yeti.

The Remimbe is rather closely pegged to the dollar and the Chinese are happy to quote about everything in Dollars, even stuff they sell to Japan and Europe. So for the mass of stuff moving out of China, dollars or remimbe it does not matter much. The tiny "mee too" countries being sucked along behind China are also forced to work pretty much in dollars to remain competitive. Also, lots of commodities such as oil are only traded worldwide in dollars.

There is also a pass through effect. If you are a US company building computers in China and need a Seagate hardrive, the chinese order them from Thailand for installing in China. Thats listed as a ASEAN export. So its real hard to follow the supply chain, instead you have to look at the consumption side and thats is about only Euros and Dollars. I dont know the split but its huge. Asia, middle east and africa consume very very little.

So if I were to guess, considering commodities traded in dollars, pass through, and corporate ownership, dollars would be the majority for Thailand exports. Maybe not a lot over Euros but its a number that would be hard to pin down.

[dogleg]

So what will happen when the Chinese decide they dont want to quote export or import in USD anymore?

[puipuitom]

Well here is the problem Yeti.

The Remimbe is rather closely pegged to the dollar and the Chinese are happy to quote about everything in Dollars, even stuff they sell to Japan and Europe. So for the mass of stuff moving out of China, dollars or remimbe it does not matter much. The tiny "mee too" countries being sucked along behind China are also forced to work pretty much in dollars to remain competitive. Also, lots of commodities such as oil are only traded worldwide in dollars.

There is also a pass through effect. If you are a US company building computers in China and need a Seagate hardrive, the chinese order them from Thailand for installing in China. Thats listed as a ASEAN export. So its real hard to follow the supply chain, instead you have to look at the consumption side and thats is about only Euros and Dollars. I dont know the split but its huge. Asia, middle east and africa consume very very little.

So if I were to guess, considering commodities traded in dollars, pass through, and corporate ownership, dollars would be the majority for Thailand exports. Maybe not a lot over Euros but its a number that would be hard to pin down.

Sorry, but incorrect.

RMB grows stronger and stronger versus the downfalling US$, but decreases in value to the Euro.

Since 2007 ALL my imports from China are in Euro

[puipuitom]

So what will happen when the Chinese decide they dont want to quote export or import in USD anymore?

Already doing so. Not only the Chinese, but also the Sri Lankans, the Thai's, even Latin America is switching to the Euro

But .. you can still use the US$ as wall paper ....

[Naam]

So what will happen when the Chinese decide they dont want to quote export or import in USD anymore?

they won't sell what they used to sell to the U.S. of A. and will change their mind EXTREMELY fast. as simple as that.

[xbusman]

Well here is the problem Yeti.

The Remimbe is rather closely pegged to the dollar and the Chinese are happy to quote about everything in Dollars, even stuff they sell to Japan and Europe. So for the mass of stuff moving out of China, dollars or remimbe it does not matter much. The tiny "mee too" countries being sucked along behind China are also forced to work pretty much in dollars to remain competitive. Also, lots of commodities such as oil are only traded worldwide in dollars.

There is also a pass through effect. If you are a US company building computers in China and need a Seagate hardrive, the chinese order them from Thailand for installing in China. Thats listed as a ASEAN export. So its real hard to follow the supply chain, instead you have to look at the consumption side and thats is about only Euros and Dollars. I dont know the split but its huge. Asia, middle east and africa consume very very little.

So if I were to guess, considering commodities traded in dollars, pass through, and corporate ownership, dollars would be the majority for Thailand exports. Maybe not a lot over Euros but its a number that would be hard to pin down.

Sorry, but incorrect.

RMB grows stronger and stronger versus the downfalling US$, but decreases in value to the Euro.

Since 2007 ALL my imports from China are in Euro

Sorry but incorrect.

The RMB is loosely pegged to the dollar, that has been slowly changing but for all extents its pretty firmly attached. Being that you are in the Netherlands, I would expect much of your quoting to be done in Euros. The Chinese are very very accommodating when it comes to being paid. Its the Euro that is increasing against the RMB and $, and in the end a wonderful thing that. I personally am hoping for $4 per Euro as I have lots of friends at Boeing.

So you can pay the chinese in RMB, Euros, zimbabwe dollars, they dont care as long as the bank will take it. In the end, they have chosen to marry the dollar with all the benefits and problems that causes them.

[Old Man River]

Note, I am not saying that the majority of Thailand's exports go to the US, only that the majority are USD denominated.

Well, in 2006 (2007 figures are not available yet) Thailand exports were: 16.1% towards ASEAN, 15% towards the USA, 13% towards the EC, 12.7% towards Japan. Even if some ASEAN exports were US$ denominated, I don't see how you can arrive to "the majority are USD denominated".

Yeti, many countries other than the US buy their raw materials and sell their products in USD's or in currencies related to the going USD exchange rate.

A good bit of Japanese imports, for example, are USD denominated therefore they export a great deal in USD's to give themselves a natural hedge. Oil and its derivates (petrochemicals etc.), for example, are USD denominated and it doesn't matter which country is involved. The quote maybe in another currency, but it will be based on the going USD equivalent of the currency being quoted. Hence, while many people don't realize it, USD's have been the base currency in the vast majority of the world's trade.

George Soros had an interesting view on this when interviewed in Davos. He said while the USD has been the main currency in global trade, he sees other currencies now becoming as important in global trade. While he didn't mention specifically which ones, we can pretty much guess. He specifically noted that he was not saying that the USD would cease being a major trade currency, only that it will not continue to be the #1 currency that global trade is based on as it has been.

[Jai Dee]

Hi Jai Dee,

Could you please change the title of this thread ? It is wrong because imprecise.

It's only a high record relative to US$, or rather a low record of the US$...

Thread title edited.

[Jai Dee]

Dollar Falls To New Multi-month Low Versus Thai Baht

In Asian trading on Monday, the dollar declined against the Thai Baht. At about 10:35 pm ET, the pair hit a new multi-month low of 32.91, which may be compared to last week's close of 33.05.

Source: NASDAQ - 04 February 2008

[Jai Dee]

S$, RM, baht hit new decade highs

ASIAN currencies rose against a broadly weak dollar on Wednesday amid expectations of further US interest rate cuts, with the Singapore dollar, Malaysian ringgit and Thai baht hitting fresh decade highs.

The Singapore dollar hit a fresh 11-year high at 1.4011 per US dollar, approaching important 1.4 level.

A trader said she expected the Singapore dollar to move between 1.4010 and 1.4030 for the day, and cautioned about likely efforts by the central bank to defend the 1.4 level.

The Thai baht , Asia's best performer this year, briefly hit 32.17 per dollar, up almost 0.3 per cent from late Asian trade on Tuesday to its highest since August 1997.

'The dollar/baht is still heavy from exporters' dollar sales plus expectations about lifting capital controls,' said a trader in Bangkok.

Investors believe the government will scrap capital controls imposed in late 2006, which were designed to curb currency rises to protect local exporters, in coming weeks.

The onshore baht has gained nearly 4.7 per cent so far this year, after a 7 per cent rise in 2007.

The Bank of Thailand is widely expected to keep its policy interest rate steady at 3.25 per cent later in the day.

The Thai rate - the lowest in emerging Asia, is higher than the US fed funds rate, which has fallen rapidly to 3 per cent.

Meanwhile, the Malaysian ringgit rose as far as 3.204 per dollar, up 0.3 per cent to its highest since late 1997.

The dollar hit an all-time low against a basket of currencies after weak economic data and comments from a Fed official signalled that US interest rates will continue to head lower.

Fed Vice Chairman Donald Kohn said on Tuesday that a weak US economy was a bigger worry than higher inflation risks.

Meanwhile, the Indonesian rupiah hit 9,037 per dollar, up almost 0.6 per cent from late Asian trade on Tuesday.

'Unless there is another wave of inflows today, the rupiah should retrace a bit,' said a trader in Jakarta.

'I think the 9,000 level should be a stronger support for the dollar if 9,030 breaks,' he said.

Source: New Straits Times - 27 February 2008

[Jai Dee]

Bank of Thailand Refrains From Rate Cut on Inflation

Thailand's central bank refrained from cutting its benchmark interest rate after a report showed the economy grew at the fastest pace in seven quarters and inflation accelerated to an 18-month high.

The Bank of Thailand held its one-day bond repurchase rate at 3.25 percent for the fifth time since August last year. The decision announced in Bangkok today was predicted by 10 of 16 economists surveyed by Bloomberg News. Six forecast a reduction.

Thailand's economy grew 5.7 percent in the fourth quarter from a year earlier as earnings from exports of rice, automobiles and computer chips helped spur domestic demand. A report this month that consumer prices gained 4.3 percent in January may have also weighed on the bank's decision to leave rates unchanged.

"We still see quite a bit of risk for inflation,'' said Vishnu Varathan, an economist at Forecast Singapore Pte, before today's decision. "It will be quite difficult for Thailand to pull off a rate cut at this juncture.''

Thailand's baht advanced to the highest since August 1997 following the decision. The currency rose 0.5 percent to 32.12 per dollar as of 2:35 p.m. in Bangkok, according to data compiled by Bloomberg. In offshore trading, the currency rose 1.1 percent to 30.10.

"Inflation remains a concern as the rate is quite high now,'' Duangmanee Vongpradhip, a Bank of Thailand assistant governor, said today. "We expect inflation to accelerate further for a while before starting to fall.''

The Commerce Ministry aims to hold the Thai inflation rate to between 3 percent and 3.5 percent this year.

Asian Inflation

Other central banks in the region have also kept rates on hold as accelerating inflation and buoyant domestic growth have weakened the case for a cut in borrowing costs.

Malaysia's central bank kept its benchmark interest rate unchanged for a 15th straight meeting this week. India's central bank left interest rates unchanged in January and Indonesia followed suit Feb. 6.

Some economists had predicted the Bank of Thailand would lower borrowing costs amid pressure from the government, which took office this month pledging to boost growth.

Finance Minister Surapong Suebwonglee said on Feb. 12 the economy may expand more than 5.5 percent this year, up from 4.8 percent in 2007, adding that he wants to achieve 6 percent growth. Prime Minister Samak Sundaravej said a week later the government will use monetary policy to support economic growth.

"The sooner the central bank cuts rates, the more promising the outlook,'' said Aksarapak Wongcharoen, an economist at Tisco Securities Ltd. in Bangkok.

Export Growth Cools

The government's forecasts jar with those of some economists, who predict a drop in Thailand's export growth because of a weaker global economy.

Goldman Sachs Group Inc. last month cut its 2008 growth forecast for Thailand to 4 percent from 4.5 percent.

The new government needs buoyant economic growth to make sure it earns enough revenue to pay for its spending goals.

It plans to invest 1.5 trillion baht ($50 billion) in the next three to four years to expand the nation's mass transit system, and develop airports, health care and education as part of a plan to buoy the economy. It will also propose tax cuts to spur local spending and investment, Surapong said Feb. 26.

Source: Bloomberg - 27 February 2008

[george]

Baht likely to hit 30.80 to dollar within month, analysts say

BANGKOK: -- The baht is likely to further strengthen to 30.80 to the US dollar in the next four weeks following the lifting of the 30 per cent reserve requirement, according to Thailand's Stock Analysts' Association.

Sombat Naravuthichai, the association's secretary-general, unveiled a survey on opinions of stock analysts from 20 companies on "Stock Investment Outlook after Capital Controls End" showed that 80 per cent of them backed the lifting of the measure while 15 per cent did not.

It found that 60 per cent saw the move as having a positive effect on the Stock Exchange of Thailand (SET) since it could boost foreign investor confidence and encourage foreign capital movement int the country, while 50 per cent believed it would benefit property companies, foreign debt-incurred firms, and commercial banks.

However, it would have a negative impact on the export, energy, petrochemical, and electronics sectors since most such companies earn dollar-denominated revenues.

In addition, 65 per cent of the analysts projected the baht would further appreciate to 30.80 to the dollar in the next month compared with the 32.20 baht to the dollar forecast on January 29.

The association maintained their previous forecast that the SET composite index would rally to 958 points by the end of this year.

The top three factors with a great impact on the market include the local political situation, the United States economic recession due to the sub-prime lending crisis, and Thailand's state economic stimulus package.

Mr. Sombat said most analysts recommended an "overweight" investment in stocks in the property sector since they benefit from the capital controls end.

They also recommended buying stocks in sectors that benefit from domestic economic recovery and with sound dividends, including those in commercial bank and energy sectors.

However, they recommended avoiding investment in the export sector since it would be affected by the stronger baht.

-- TNA 2008-03-06