30% Capital Controls Removed!

[Knightsbridge]

Yes, something to to do with the Jap stock market selling off its export companies due to the high Dollar - a real shivers-sender around the world and an unfortunate surprise for the morning.... and probably affecting the afternoon..... sigh ....

correction ... due to the very low dollar...

[maxcrc]

so what do you think'll happen next???

it happened already. Baht stronger vs. any currency you can think of.

Interesting that this morning OANDA (offshore) shows 62.57, a near three baht weakening over the weekend, I would have expected the reverse to happen - Bangkok Bank is quoting 61.97 and XE at 59. something. It doesn't make a lot of sense currently.

today Baht is even weaker against a weaker Dollar. on friday THB/USD 31.30, today 31.45

the offshore rate and the onshore rate are expected to merge so that in the offshore rate it is not a srprise a lower baht.

Today it has lowered even in the onshore market, but it can be just a consecuence of the 6 minutes crazy frenzy just after the announcement of the capital restrictions removal.

As you can see in the exchange rates of the SCB I posted above just after the announcment baht jumped 3% against virtually all world currency (in 6 minutes).

And the important factor is that it has happened at late Friday (very important to mention that), because for Saturday and Sunday of course there is no market.

In fact if you check the exchange rates of Superrich 1965 they always have a small gap between buying and selling rate (only 0.10 baht for the dollar and 0.3 for the euro), but at late Friday they had 0.7 baht difference between buying and selling rate of the dollar ! Why ?

Because they are open on weekends and they were afraid somebody could buy large ammounts of bahts and resell them in few days (or it could happen the opposite ,since today baht fell ) so by keeping the difference between buying and selling very close in a moment of so much jittery and frenzy on the markets, they risked very big losses,because in these situations it is difficult to predict the market movements.

Superrich is constatly adjourning their rates according to the markey every few minutes, but this problem of the anouncement came late Friday , so on the weekend while they are open and market is close they had to widen the gap not to risk losses.

I heard that the extra measures could be taken to stem the baht appreciation in the near future may be a managed floating (similar to many asian countries) which would keep the baht between two bands or its rate moving accoring to a basket of currencies (like in China).

Putting money on the market will not be used for 2 reasons: 1-they already tried it without success 2-inflation data today is alarmant and by putting money in the street would worsen it

So that for now benchmark will not be cut, they want to cut it because it looks like they want to stimulate the growth,but damned oil prices is keeping prices galopping (at 20 months high) so as soon as damned oil will go down , inflation will be under less pressure , benchmark will be cut, growth will be stimulate and baht could stabilize (i am not saying going down,but at least stabilize).

More money will come to Thailand but also some restrictions for Thais to invest abroad are being removed (and bahts now worth more abroad) so that some more money will go out too.

Edited March 3, 2008 by maxcrc

[cclub75]

I heard that the extra measures could be taken to stem the baht appreciation in the near future may be a managed floating (similar to many asian countries) which would keep the baht between two bands or its rate moving accoring to a basket of currencies (like in China).

Putting money on the market will not be used for 2 reasons: 1-they already tried it without success 2-inflation data today is alarmant and by putting money in the street would worsen it

"Extra measures" ? Nothing new.

The old trick of all asian central banks :

-buying USD on the local market (exchange them against THB)

-and then issuing bonds to "sterilize" those liquidities (to curb the growth of inflation... curb only as we see... it's not very successful)

Check this article.

And this one (from february 2007) that explain the huge gambit on the future the BOT is playing...

Furthermore, i don't see any difference between "fixed rate" and "managed floating", or "floating within bands" ! It's exactly the same : currency manipulation, interventions.

Japan does it. China too. But those countries are massive... Thailand does it... Now this is much more dangerous...

[maxcrc]

I heard that the extra measures could be taken to stem the baht appreciation in the near future may be a managed floating (similar to many asian countries) which would keep the baht between two bands or its rate moving accoring to a basket of currencies (like in China).

Putting money on the market will not be used for 2 reasons: 1-they already tried it without success 2-inflation data today is alarmant and by putting money in the street would worsen it

"Extra measures" ? Nothing new.

The old trick of all asian central banks :

-buying USD on the local market (exchange them against THB)

-and then issuing bonds to "sterilize" those liquidities (to curb the growth of inflation... curb only as we see... it's not very successful)

Check this article.

And this one (from february 2007) that explain the huge gambit on the future the BOT is playing...

Furthermore, i don't see any difference between "fixed rate" and "managed floating", or "floating within bands" ! It's exactly the same : currency manipulation, interventions.

Japan does it. China too. But those countries are massive... Thailand does it... Now this is much more dangerous...

it is not exactly the same but they are different forms of manipulation.

Within bands means a max and a min, will be given like say 30.0 and 33.0...in this case baht would tend to peg to the lower band, which in fact would be almost a virtual peg (see the case of Costa Rica).

Managed floating with a basket of currencies is like China is doing ...

Pegged currency is like Hong Kong... in fact it is also a band system but bands are so close that we can call it an almost fixed rate

it is like having a dog and tie him with a short or longer collar...

[Old Man River]

I heard that the extra measures could be taken to stem the baht appreciation in the near future may be a managed floating (similar to many asian countries) which would keep the baht between two bands or its rate moving accoring to a basket of currencies (like in China).

Been there. Done that. Didn't work before and won't work now, although I have expected for quite some time that they would revert back to this. Dr. Olarn is now openly pushing for it (short memory). If they do it, they need to be ready to un-do it quickly if attacked (again).

Really, as long as market forces are leading to a strengthening THB vis a vis the USD, there isn't much they can do other than let the THB seek the level that supply and demand takes it. Continually printing money and subsequently sterilizing it can't go on forever. Apart from losses in their USD portfolio, the bonds used to sterilize the increased money supply carry an interest rate and investing the USD's only gives a nominal return. Existing THB bonds coupled with the THB 800 billion or so that will be issued for upcoming mega projects will start getting expensive.

[spasticated]

Look at the results now for the uk£ I was expecting to lose a fair bit yet today its at a 2 month high against the baht......... changed my money yesterday before BOE meeting and then the sods didnt lower the base rate as I thought they may.

[maxcrc]

Look at the results now for the uk£ I was expecting to lose a fair bit yet today its at a 2 month high against the baht......... changed my money yesterday before BOE meeting and then the sods didnt lower the base rate as I thought they may.

That s curious.

After the 30% rule removed and the 6 minutes frenzy of late Friday when baht appreciated about 3% against any currency, baht has not appreciated these days against the dollar, despite dollar terrible performance against european currencies.

So that euro and other european currencies are up vs. the baht this week.

[maxcrc]

I heard that the extra measures could be taken to stem the baht appreciation in the near future may be a managed floating (similar to many asian countries) which would keep the baht between two bands or its rate moving accoring to a basket of currencies (like in China).

Been there. Done that. Didn't work before and won't work now, although I have expected for quite some time that they would revert back to this. Dr. Olarn is now openly pushing for it (short memory). If they do it, they need to be ready to un-do it quickly if attacked (again).

Really, as long as market forces are leading to a strengthening THB vis a vis the USD, there isn't much they can do other than let the THB seek the level that supply and demand takes it. Continually printing money and subsequently sterilizing it can't go on forever. Apart from losses in their USD portfolio, the bonds used to sterilize the increased money supply carry an interest rate and investing the USD's only gives a nominal return. Existing THB bonds coupled with the THB 800 billion or so that will be issued for upcoming mega projects will start getting expensive.

Yes, I agree with you.

I didn t say I agreed with that measures, I just reported their proposals.

You know, anyway in some countries under particular situations , currency within bands maybe a temporaly measure whilst taking more effective permanent reforms.

I am not saying it is the case of Thailand right now, but I saw some situations in the past in some latinamerican countries in which bands had to be set to refrain speculators. There were cases in which most of the capital was concentred in few hands of people playing with the market at their will.

There are no magic receipts, measures need to be taken according with the country reality and according with the current situation.

Putting the baht within bands right now (which could result in a virtual peg to the lower band) would be just like buying time, but buying time to do what ? They have to think about what they want to do before putting a temporaly measure.

If they put the temporaly measure first and than think about what they will do, it is a nonsense. It would also sound like a step back and going towards market controls again.

Edited March 7, 2008 by maxcrc

[Irene]

Look at the results now for the uk£ I was expecting to lose a fair bit yet today its at a 2 month high against the baht......... changed my money yesterday before BOE meeting and then the sods didnt lower the base rate as I thought they may.

That s curious.

After the 30% rule removed and the 6 minutes frenzy of late Friday when baht appreciated about 3% against any currency, baht has not appreciated these days against the dollar, despite dollar terrible performance against european currencies.

So that euro and other european currencies are up vs. the baht this week.

I think it is the market intervention of the Bank of Thailand to pacify all the Thai exporters. Wait for a few weeks, one might see the real natural exchange rate.

[Old Man River]

I heard that the extra measures could be taken to stem the baht appreciation in the near future may be a managed floating (similar to many asian countries) which would keep the baht between two bands or its rate moving accoring to a basket of currencies (like in China).

Been there. Done that. Didn't work before and won't work now, although I have expected for quite some time that they would revert back to this. Dr. Olarn is now openly pushing for it (short memory). If they do it, they need to be ready to un-do it quickly if attacked (again).

Really, as long as market forces are leading to a strengthening THB vis a vis the USD, there isn't much they can do other than let the THB seek the level that supply and demand takes it. Continually printing money and subsequently sterilizing it can't go on forever. Apart from losses in their USD portfolio, the bonds used to sterilize the increased money supply carry an interest rate and investing the USD's only gives a nominal return. Existing THB bonds coupled with the THB 800 billion or so that will be issued for upcoming mega projects will start getting expensive.

Yes, I agree with you.

I didn t say I agreed with that measures, I just reported their proposals.

You know, anyway in some countries under particular situations , currency within bands maybe a temporaly measure whilst taking more effective permanent reforms.

I am not saying it is the case of Thailand right now, but I saw some situations in the past in some latinamerican countries in which bands had to be set to refrain speculators. There were cases in which most of the capital was concentred in few hands of people playing with the market at their will.

There are no magic receipts, measures need to be taken according with the country reality and according with the current situation.

Putting the baht within bands right now (which could result in a virtual peg to the lower band) would be just like buying time, but buying time to do what ? They have to think about what they want to do before putting a temporaly measure.

If they put the temporaly measure first and than think about what they will do, it is a nonsense. It would also sound like a step back and going towards market controls again.

A band would be a very short term measure if speculators come back. It only works if those attacking a country's currency can't get that currency outside of the country being attacked. If this can be controlled, then OK. Malaysia was successful in doing this, but it would take that type of measure (basically, making your home currency non convertible outside of your home country). It puts a damper on international trade to say the least.