Offshore / Onshore Rate Gap Closing!

[Marvo]

All the talk is of the general weakening of the US Dollar Vs the baht, but:

OFFshore, between 9th November 2007 and 12th February 2008, the Pound Sterling shows a fall of 3 baht.

ONshore, between 9th November 2007 and 12th February 2008, the Pound Sterling shows a fall of 7 baht.

This shows a dramatic closing of the OFF/ON shore rate regarding the UK Pound WHEREAS the dollar has fallen only:

OFFshore 0.8 baht

ONshore 1.04 baht

Can one of you geniuses (genii?) please tell me what's going on? It looks like BOT don't want UK pounds anymore which is a shame as I need to change up a large wedge in the next couple of weeks.

Cheers.

[samran]

probably cause there is speculation that the capital controls will be lifted shortly.

[fletchsmile]

The gap in rates arose mainly from capital controls. As the new government in conjunction with BoT removes the controls one by one, then the rates will converge again. They are not removing all controls immediately, but in stages so it is managed more smoothly.

By "more smoothly" that is they don't want the THB to appreciate too quickly.

Edited February 12, 2008 by fletchsmile

[Marvo]

The gap in rates arose mainly from capital controls. As the new government in conjunction with BoT removes the controls one by one, then the rates will converge again. They are not removing all controls immediately, but in stages so it is managed more smoothly.

By "more smoothly" that is they don't want the THB to appreciate too quickly.

But why does this one strategy have such a difference in the effect regarding the UK pound and the US dollar?

[wasabi]

The rate gap is closing as Thailand prepares it's aggressive takeover bid for Yahoo. I've heard they will bid 50 a share to show MSFT who's boss.

[Old Man River]

probably cause there is speculation that the capital controls will be lifted shortly.

Samran, from the article below it looks like it is no longer speculation. Samak's mega projects will require funding from foreign investors buying THB government bonds (through the Vayuphak II fund). The road shows for this fund will be in March and April and Suraphong knows he cannot sell this fund to foreign investors while the 30% reserve requirement is in place. Hence, the capital conrols need to be abolished. The PPP knows when the capital controls are abolished that the THB will strengthen. Suraphong will then use this strengthening as a reason to fire Tarisa, putting into that position someone they can more easily control.

http://blog.nationmultimedia.com/thanong/2008/02/12/entry-1

[astromash]

Suraphong knows he cannot sell this fund to foreign investors while the 30% reserve requirement is in place. Hence, the capital conrols need to be abolished.

My memory may be failing .. in fact I'm sure it is ... but I seem to remember just before Thailand introduced the 30 percent thingy the inshore rate for sterling was typically about 4-5 baht better than the offshore rate.

And so it continued until the subprime monster started seriously mauling the pound relatively recently.

So I no understand

Which, economically speaking, is nothing new

Edited February 13, 2008 by astromash

[Naam]

Suraphong knows he cannot sell this fund to foreign investors while the 30% reserve requirement is in place. Hence, the capital conrols need to be abolished.

My memory may be failing .. in fact I'm sure it is ... but I seem to remember just before Thailand introduced the 30 percent thingy the inshore rate for sterling was typically about 4-5 baht better than the offshore rate.

And so it continued until the subprime monster started seriously mauling the pound relatively recently.

So I no understand

Which, economically speaking, is nothing new

your memory is indeed failing and indeed you only "seem" to remember

[astromash]

your memory is indeed failing and indeed you only "seem" to remember

Fascinating. I'm sure you're right although you don't say what I've remembered incorrectly.

So please tell me more. When did the 30 percent reserve requirement come into effect? Before Songkran 2006?

Edited February 13, 2008 by astromash

[astromash]

When did the 30 percent reserve requirement come into effect?

I've just read on another board it was about a year ago.

Is that correct?

[Old Man River]

When did the 30 percent reserve requirement come into effect?

I've just read on another board it was about a year ago.

Is that correct?

Dec. 2006.

[astromash]

Dec. 2006.

Okay. And earlier in 2006 there was a difference between offshore and onshore rates. The onshore rate, I suggest, was about 4-5 baht more to the pound. Approximately the same as it was for much of 2007?

So you guys must be talking about capital controls other than - or in addition to - the 30 percent measure in Dec 2006???

I'm just seeking an answer to the question the OP put.

[Naam]

your memory is indeed failing and indeed you only "seem" to remember

Fascinating. I'm sure you're right although you don't say what I've remembered incorrectly.

So please tell me more. When did the 30 percent reserve requirement come into effect? Before Songkran 2006?

you remembered incorrectly that there was a difference of 4-5 baht vs. GBP before the 30% (16. december 2006) requirement came into effect.

[Naam]

Dec. 2006.

Okay. And earlier in 2006 there was a difference between offshore and onshore rates. The onshore rate, I suggest, was about 4-5 baht more to the pound. Approximately the same as it was for much of 2007?

Astromash, you may suggest whatever you want. free speech is granted. but i wonder which language i should use to tell you that there was no such diffference as you suggest

[Old Man River]

Dec. 2006.

Okay. And earlier in 2006 there was a difference between offshore and onshore rates. The onshore rate, I suggest, was about 4-5 baht more to the pound. Approximately the same as it was for much of 2007?

Astromash, you may suggest whatever you want. free speech is granted. but i wonder which language i should use to tell you that there was no such diffference as you suggest

Maybe his bank was just ripping him off.