BOT Revokes Capital Control Measure From Monday

[harleyclarkey]

My humble opion? The weak dollar is only part of the influence as the Baht has streghtened against a healthy Euro. It dollar has weakened against all major currencies...this morning I bought dollars at 1.50 to the Euro....never got this rate before. Happy days..I'm in a daze!!!! As for sterling...today offered .75 to the Euro...again never seen before.

However even with the onward and upward spiral of the Baht, Thailand is still dirt cheap by Westerner standards. Hotels/food/transport/entertainment is very very affordable. If you earn in the West and spend in the East..no problem. It is different for the guys on local monies.

[Langsuan Man]

The reason we talk about the US dollar is because OIL is priced in US dollars, therefore the impact of the weak dollar effects all of us.

I doesn't make any difference what currency you use, the weak US dollar will eventually impact you since inevitably OPEC is going to price oil in something other than the US dollar.

Despite the negative comments about economists there are some truths that do stand up to scrutiny. One of which, is that the rise in oil prices is due in part because of OPEC's reliance on dollars as the benchmark currency. OPEC needs more dollars to pay for their oil which has had a spiral effect on the world economy. No matter where you turn oil is going to impact you one way or another and until the US gets it house in order the whole world is going to suffer.

LSM

[tracer5050]

As long as the US Fed keeps dropping the intrest rate the Dollar will keep going down. It has always done that and will keep doing it. Maybe next year after the elections HOPE SO ANYWAY.

[oldmerlin]

As long as the US Fed keeps dropping the intrest rate the Dollar will keep going down. It has always done that and will keep doing it. Maybe next year after the elections HOPE SO ANYWAY.

Current quote is 10 GBP = 585.8 TBhT.

Poorest rate for the GBp for ages. As we're going to LOS soon, glad we bought a load of Baht a while ago.

Edited February 29, 2008 by oldmerlin

[Martin]

Back on topic, the baht/dollar rate only moved slightly on the news of the ending of the capital control measure.

So the BOT had chosen the right moment to 'step from one boat to the other'.

On the broader discussion of the weakening of the US dollar and the strength of the baht, I expect that the dollar (and pound) will continue to trend down, but there may be some fluctuations along the way.

We started debating this, from memory, getting on from two years ago in a thread about 'Get out of the $dollar$ now'.

For a central banker in a country that exports oil, it makes sense to quietly buy the currencies of countries that have the long-term sound base of ability to export food. So don't expect the Thai baht to ever weaken much. A slight weakening will just cause a bit more purchasing that will cause the weakening to stop.

Personally, for over two years I have been resigned to the fact that my sterling pensions are going to gradually lose more and more of their purchasing power here. But 'mae pen lie': the house is paid for and we have our rice fields and so are insulated from the big rises in the price of rice that have already started and have a long way to go. And our savings in negotiable instruments are all in the form of little gold bars in our Safe Deposit here in Thailand.

I accept that puts me amongst the most unadventurous in matters financial, but it helps me sleep easily at night. (More easily than if the gold were in a country that might confiscate it---as Praesident Nixon did to the Americans not that long ago.)

With regard to the poster who foresaw that Thailand's manufacture-for-export could collapse when the proverbial really hits the fan in the West, I think he is right. But those who lose their jobs as a result can come home to the villages of their parents or grandparents and be absorbed into semi-self-sufficient agriculture again. The longer-industrialised countries of the West have a more traumatic experience ahead of them. There is a bloke called Kunstler who writes about the USA having enormous adjustments ahead of it.

[Chris Lawrence]

Just part of the cycle. So the ones that are caught out want someone to blame? U r kidding. The witting has been on the wall for the US dollar for a while, They need to get rid of that Texan that runs the country that sent his oil company broke before he got into office. What did you really expect this genius to do; turn everything around?

[Naam]

Back on topic, the baht/dollar rate only moved slightly on the news of the ending of the capital control measure.

i wouldn't call a drop from 31.80 to 31.30 "slightly" which is the biggest single move in years!

[Naam]

like most of us who live here lost far to much money in the exchange rate now I don't give a <deleted>/ck about thailand baht the sooner it crashes & burns the happier I will be

we all have our dreams. you a dropping Baht, me that my wife permits me to have a mia noi

[britmaveric]

$ will rise, think long term, not short term.

[AsiaCheese]

Is this not more of a dollar weakness story? The baht sank today against JPY.

Might just be both. The Swiss Franc (CHF) was about the same as previous days today...

[george]

Thai central bank lifts capital controls Monday

BANGKOK: -- After a year of implementing reserve witholding measure, by which Thailand forced investors to hold in reserve 30 per cent of all short-term capital flowing into the country, the Bank of Thailand (BoT), the country's central bank, acted Friday to remove the measure, effective Monday.

BoT Governor Tarisa Watanagase announced the lifting of the controversial measures to take effect March 3, ending the regime of the unremunerated reserve requirement (URR) after nearly 15 months in effect, a measure that was introduced to rein in the volatility of the Thai baht when demand was falling and "robust export growth was the main driver of the economy".

Political and economic players alike have both supported and condemned both the initiation the measures, and the ending of their implementation.

Stating that the country's economic performance in the last quarter of 2007 and in January this year indicated that the time was right to withdraw the measures, Mrs. Tarisa indicated Friday that the time had arrived.

"Foreign exchange inflows/outflows have become more balanced', according to a BoT statement, with a moderate trade account surplus in January 2008, increasing Thai investments abroad, and regulations permitting residents to deposit foreign currencies as of this month.

The appreciation of the baht – whether it will continue, and by how much – is at issue.

Mrs. Tarisa told a press conference that the controversial capital controls the BoT had imposed to restrain the country's currency from getting too strong had done the job they were intended to do.

The BoT's move follows the policy of the new government of Prime Minister Samak Sundaravej to remove the controls.

The central bank's web site is carrying notification of the lifting of the URR measures, rules for non-resident baht accounts and related matters at www.bot.or.th

-- TNA 2008-02-29

[puipuitom]

Oh joy, as the baht to the dollar hit the worst place in years,

THEN they decide to let it go free as the wind.

Just the announcement makes me lose money.

New government, same 'logic'.

Same, same, but less.

What's the problem ? Till 1997 you got only 25 THB per US$, and since then a lot more.

Second: since the USA is borrowing so much, at a certain point the rest of the world will start to hesitate, seen worsening exchange rate and lower interest. That is happening now.

Out of the continuous sinking of the US$ versus other currencies, more and more companies / countries will stop to sell in US$ and switch to ... Euro.

I get one after another announcement of that, from China, Vietnam, Peru etc.

Matter of time, and 1 US$ will be only 20 THB or even less.

[britmaveric]

[12DrinkMore]

Toxin back and the next day the THB onshore/offshore rates are equalised, resulting in a stronger THB. Toxin apparently has not come up with the cash he promised on the takeover of Manchester City football club. He also has billions still in Thailand, how opportune for him that the Baht has become stronger...

At the current rate the THB will cause massive problems with Thai exports that have already been suffering. The tourist industry will also have major problems, hotel rates are already becoming very expensive, USD 50/night is now at the very low end of the scale. And what are you paying for? Phuket/Samui/Pattaya/Krabi are rapidly becoming cess pits of tourist development. Might as well stay in Europe, or try Vietnam, Philippines, Malyasia and Indonesia.

Thailand value for money? Cheap? Well, maybe for the package holiday makers, who buy beer at the 7/11, otherwise I don't think that it is good value for money.

Nope, sorry for you Thais, you had a good thing going and screwed it up.

Bye bye.

[SNGLIFE]

The dollar will continue to weaken. There is no catalyst in sight that would spark a reversal. Sure there may be a couple of feel good moments sometime around the US elections when Obama becomes President and next year when he takes office, but there are many, many catalysts in sight which point to a further weakening:

(not exhaustive)

1. Oil. More specifically peak oil. What goes under-reported in mainstream media is what should have everyone's attention - not the headlines. This past week, Saudi Arabia said for the first year ever, that they can no longer increase production over the previous year. In doing so, they have finally admitted that they have peaked; and when Saudi Arabia peaks, the world peaks. Basic decreasing supply and increasing demand forces (and "irrational exhuberance" in the market) will steer the price of oil.

2. Collapse of the financial markets. Remember those dark days in August and again in December? Ha, that was just a taste. Governments have been heavily intervening in the markets to support the dollar and patch-up the sub-prime mess during and since. The Fed has drastically increased its printing of its worthless paper (recall that it is NOT backed by anything other than a promise to pay). This cannot go on indefinitely anymore than you or I could continue to write post-dated checks and use our credit cards to cover our bills. As more paper is printed, the existing outstanding paper loses more of its worth. Who holds over $1.5 TRILLION of US debt and paper? China. Who is next on the list? Japan with ~$1 TRILLION. Followed by many others including oil producing countries. They are now quietly accepting payments in other currencies. What would be the rational course of action? Slowly dump the dollar - this is what has been accelerating the dollar decline since the start of the Iraq war. Again, the governments are delaying the collapse. Nothing will stop it. The US, with plenty of room on its Federal credit card was able to spend its way out of dire straits in the past. At almost $10 TRILLION dollars of on-book debt (if one includes off-book debt, that number is more than $55 TRILLION), America's credit card is just about maxed out.

3. Regional instability. Regardless of whether the US stays or leaves the middle-east, uncertainty will remain. How the markets react to uncertainty is academic. Higher oil = higher everything.

Those are the top considerations to think about through 2009, and perhaps 2010. In Thailand, I smell 1997 all over again IF:

1. It happens that Thai banks (or regional banks who have critical relationships with Thai banks) have more exposure to the sub-prime mess than has been made public. This would force a write-down of assets which in turn would shake confidence, which in turn would decrease banks' ratings, which may (with emphasis) spark fear-driven withdrawals. Everyone still remembers 1997 and nobody is gonna wait-and-see for very long.

2. Foreign investment decelerates because doing so continues to be increasingly expensive, and those foreign dollars are kept at home to fix problems at home.

3. More and more factories and exporters (and their down-market suppliers) shut down because of the higher baht leading to a ripple affect within Thailand of business, consumer, and mortgage loan defaults.

What to do:

IMHO, one should keep money in precious metals and oil. Stay out of currencies, stay out of consumer sentiment dependent stocks (because sentiment will continue to wane as prices go up). Ride the fundamentals and the wave of irrational exuberance surrounding them. This weeks market ups are hedge funds getting back in after pulling out in January. Best time to get in was last month when there was blood in the streets. Good time is now.

My 2 satang. Do your own research and make your own decisions.

Edited February 29, 2008 by SNGLIFE

[terryp]

yes TERRYP you will know it all which does not stop me to post some more STUPID COMMENTS

Why do I talk about the dollar, because it seems to be the big issue in this thread (should you have read trough it).

The dollar is weak against all major currencies in this world and I would not treat the Baht as a major currency but of course against the baht it is weak as well. The reasons for that are found in the USA and the dilemma the USA has caused politically and economically. Just wait another 6 month until all the truth comes out about all the loans US banks have given to people that cannot pay the monthly rates plus all the bonds they have sold anywhere in the world which are not worth a penny. That will drive it down even further.

The main factors have very little to do with the $..It’s because of these 2 main factors

1) Asian currency’s were undervalued after 1997

2) Asia is the manufacturing hub of the World and Thai stock have been massively under valued….Hence all the funds flowing into the SET etc

China have said repeatedly that they want to outsource manufacturing into local Asian countries…Especially Thailand…the Baht is only going one way

[SNGLIFE]

1. ...regional banks who have critical relationships with Thai banks...

2. Foreign investment decelerates because doing so continues to be increasingly expensive, and those foreign dollars are kept at home to fix problems at home...

I just want to point out that what I am referring to are primarily Japanese and other SE Asian banks who have exposure in Thailand. For example, if Japanese banks (could be any other banks, too) have to take additional hits and write down assets, they will likely sell dollars to spruce up the balance sheet going forward. Why keep excessive stores of a declining asset? In addition, their credit policies will tighten more and loans to Thailand for investment in Thailand would be seriously affected.

Cheers!

[positiveaction]

Well the baht will not appreciate indefinitely and forever due to the law of comparative costs........that's what exchange rates function is to balance them up. So once the productivity is outweighed by the baht appreciation ther it ends. Which of course is why China does want to float its currency because the exchange rate would bring the LCC into play and stop there dominance in shoddily produced cheap lead ridden goods(plumbing the depths(get it))pb

[SNGLIFE]

The main factors have very little to do with the $..It’s because of these 2 main factors

1) Asian currency’s were undervalued after 1997

2) Asia is the manufacturing hub of the World and Thai stock have been massively under valued….Hence all the funds flowing into the SET etc

China have said repeatedly that they want to outsource manufacturing into local Asian countries…Especially Thailand…the Baht is only going one way

I would respectfully disagree with your points but agree with the conclusion that the baht will continue to rise versus the US dollar. To say that a currency is gaining strength is relative to what other currencies it is being measured against. Comparing it to just the dollar and drawing such a conclusion is myopic at best. Sort of like a 1 meter father saying his 1.25 meter son is tall. When some basketball players walk into the room, is the statement still true?

1. Asian currencies were not undervalued in 1997. They were allowed to float and the market valued them appropriately relative to risk of investing elsewhere at the time.

2. Ibid.

To say that China, with its over-abundance of cheap domestic labor and zero government intrusion (since in a Communist society, the factories ARE the government) would prefer to pay higher prices elsewhere to make the same product is just silly. If and when China decides to set up shops in Thailand, it will be a strategic decision to access better distribution channels such as ports and transportation routes (to service Malaysia and ship direct from Laem Chabang rather than through Singapore, for example).

Edited February 29, 2008 by SNGLIFE

[joefromdc]

I don't need to be a weather man to know which way the wind is blowing.

Of course not, you only need to be a weather man to know which way the wind is blowing NEXT week.

And I don't need to be an economist to know the rate of exchange today. Next week though?

j.

Edited February 29, 2008 by joefromdc

[mjohnson282]

Yep the dollar will continue to weaken because trades like these are always one sided. Wrong. Part macro economic policy, part speculation, and mostly market uncertainty. All markets hate uncertainty and discount it appropriately which brings in the speculators. Fed chief was on the hill and indicated more cuts were in order. All currencies had strong moves against the dollar over the past few days. These reductions in rates are short term to ease issues in the credit markets and will be unwounded in quick succession once this is acheived. Notice BOT talked about easing rates. Something to considered.The rapid depreciation of the dollar is linked to several issues already stated in previous posts. No need to rehash. But lets take a look at subprime and call it what is really is, cheap credit, junk status. To think that cheap credit was not extended in all countries in all market sectors is a mistake. To think this problem will be contained to the US serves to compounded this mistake. Someone pointed out in a previous post that Asian banks have yet to fully disclose subprime loses, an excellent point. We have yet to see major defaults in CDOs and the like and they are on a lot of books and the write downs are coming. More sophisticated markets disclose the problem and quicker to mark to market. Less transparent markets will take longer to feel the effects of this global asset bubble and the ripple effect will eventually be felt throughout the globe. So yes as there is a lot of uncertainty in the US, recession fears, real estate bubble, balance sheets of the financials and the US economy is the process of working through these issues. But stay tuned because these issues are coming to a theater near you. Take a look at Thai real estate values, up substantially over the past 5 years. Driven mostly by foreign speculative buying. These are "investments" and not primary residences or what should more appropriately be called speculation. A cooling real estate market will certainly be helped by a stronger baht. If you believe that then you also believe all the cranes and additions to supply in the residential sector are good for the market. Where is the demand coming from? Buying one off condos is typically not a means for achieving wealth. Exceptions being buying distressed condos in bulk at a significant discount to replacement cost. They US funds its deficit by selling Treasuries. Take a look at the 10 yr T bill at 3.51%. If I could borrow at that rate I would be doing it all day long.By the way the dollar gained against the Euro and GBP today.

[EmptyMind]

Ah well, Its still cheaper to live here than it was to live in the Country that we were born in, If we were really that bothered we wouldnt be here so lets stop constantly knocking the Thais and if we dont like it, we can all go home. I'm not going to get stressed over a few thousand Baht.

[appleman]

If the exchange rate is what is keeping some people in Thailand (as opposed to Viet Nam or China as a few posters have said) then maybe it is time for them to leave. I for one am living here for quite a few other reasons. Bon Voyage

[joefromdc]

EmptyMind, appleman-Well said. Cheers.

Edited March 1, 2008 by joefromdc

[george]

Update:

Mixed reaction to BoT lifting 30% foreign capital controls

BANGKOK: -- Thai private investors have expressed mixed reactions regarding the Bank of Thailand (BoT) decision to lift the 30 per cent foreign capital controls, imposed since December 2006, starting from next Monday.

Chookiat Opaswong, president of Thai Rice Exporters Association, said he personally agreed with the decision to scrap the measure because the controls failed to stem the strengthening of the Thai currency, the baht, as it had continued to strengthen steadily, especially during the past two days.

However, the BoT must have some measures such as, for example, lowering interest rates, to cushion any impact after the control was scrapped and to prevent heavy foreign inflows, said Mr. Chookiat.

BoT Governor Tarisa Watanagase announced yesterday the lifting of the controversial measures to take effect March 3, ending the regime of the unremunerated reserve requirement (URR) after nearly 15 months in effect, a measure that was introduced to rein in the volatility of the Thai baht when demand was falling and "robust export growth was the main driver of the economy".

Poj Aramwattananond, president of the Thai Frozen Foods Association, disagreed with the central bank's decision, saying the BoT had not come up with appropriate supportive measures before scrapping the controls.

Local exporters have been suffering losses because of the measures, according to Mr. Pote, adding that the baht had strengthened heavily against currencies of neighbouring countries.

Echoing Mr. Chookiat's opinion, Pichai Lertsupongkij, senior marketing director of Thanachart Fund Management, said he believed that the Thai stock market should react positively because the controls had not been welcomed by foreign investors.

The controls had affected exporters as well, but they had hedged their losses to a certain extent, Mr. Pichai said, adding that what concerned officials were concerned about now was to prevent heavy currency inflows for speculative reasons. Exporters still could accept it, he said, if the Thai baht sremained at around Bt31 against the dollar.

The baht late yesterday stood at Bt31.45 per dollar compared to about Bt31.99 on the onshore market.

--TNA 2008-03-01

[Seneque]

yes TERRYP you will know it all which does not stop me to post some more STUPID COMMENTS

Why do I talk about the dollar, because it seems to be the big issue in this thread (should you have read trough it).

The dollar is weak against all major currencies in this world and I would not treat the Baht as a major currency but of course against the baht it is weak as well. The reasons for that are found in the USA and the dilemma the USA has caused politically and economically. Just wait another 6 month until all the truth comes out about all the loans US banks have given to people that cannot pay the monthly rates plus all the bonds they have sold anywhere in the world which are not worth a penny. That will drive it down even further.

The main factors have very little to do with the $..It's because of these 2 main factors

1) Asian currency's were undervalued after 1997

2) Asia is the manufacturing hub of the World and Thai stock have been massively under valued….Hence all the funds flowing into the SET etc

China have said repeatedly that they want to outsource manufacturing into local Asian countries…Especially Thailand…the Baht is only going one way

You cannot outsource in a country where production costs are higher than yours ... seems basic in terms of investments ... Many foreign companies are not coming to Thailand, many of them are moving out of Thailand ... Thailand is a weak economy per se and most exports are not margin oriented (the rest comes from a strong import content : electronics). It is common sense to say that a strong currency (irrelevant from the fact that it will go higher or lower, who knows anyway) does not favor exports : refer to the screams from european exporters, and those of thai exporters (frozen food, canned food, etc...). We are in for tough times and the solution is to stay liquid (to hold no currency at all is a mistake, for ex. the AUD as been doing extremely well and will continue to do so), perhaps have a bit of gold/silver ... but the level is such that centrals banks are looking to cash in. Do not go into debt as this will kill you and enjoy the most you can. This year is transitional and will reset the check and balance of the financial world that has been going beserk for a while (lack of regulations). The big financial conglomerates are manipulating the whole enchilada ... stay put.

[Briggsy]

The timing of this announcement has nothing to do with benefits to the Thai economy and everything to do with very wealthy politicians making multi-million dollar forex transactions.

[Plus]

The government will be in deep shit if they screw up exporters who contribute up to 80% of country's economy and domestic investement and spending doesn't pick up (and it won't until they really start spending money on infrastructure, not just talking about it).

I hope they know what they are doing and not just rely on Surapong's experience in spa business. It was too early to take this kind of advice form Thaksin himself, he just arrived, after all.

[Old Man River]

The government will be in deep shit if they screw up exporters who contribute up to 80% of country's economy and domestic investement and spending doesn't pick up (and it won't until they really start spending money on infrastructure, not just talking about it).

Total exports comprise about 60% of the economy with approx. 10% being agricultural and other labor intensive related exports. It is this category that is the most concern to the government as it directly impacts those in the PPP's voting base. I think your conclusion is spot on. The PPP can't afford to screw this up and will spend, spend, spend to make sure that the economy picks up.

[parmi]

This is a nightmare., Thailand is becoming far too expensive

IS BECOMING TOO EXPENSIVE,,,,, i have been here ten yrs and seen a 200% rise in most of my expensise ,just go to a local GIANT SUPERMARKET, since nov 2007,thats only 3 months, my food list is the same each month,but the cost has risen 17oo bht,on a 6000bht bill in nov to 7700 today,and the management tell me the same story,,( BECAUSE OIL GO UP)but oil not go up 40% this is the beginning of the end for the thailand we all knew to be cheap,, but to complane is not the tahi way,so i am getting the f--- out of here,bye all,