Asian Currencies Decline, Led By Thailand's Baht

[george]

Asian Currencies Decline, Led by Thailand's Baht

Asian currencies declined this week, led by Thailand's baht and the Philippine peso, on concern rising oil prices will widen the region's trade deficit and fuel inflation.

The baht had its biggest weekly loss in three months as Bank of Thailand assistant governor Suchada Kirakul on June 3 said the central bank acted to curb excessive moves in the currency, without saying whether it bought or sold dollars. The peso had an eighth weekly decline after crude oil advanced more than $5 a barrel on June 5. All but one of the most-traded Asian currencies outside of Japan fell this week.

``The Bank of Thailand is grappling with a weakening baht,'' said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``A lot of energy- related companies are buying dollars and hedging their positions on the back of rising crude prices, and that's exerting pressure on the baht.''

The baht fell 1.9 percent this week to 33.13 a dollar as of 4:30 p.m. in Bangkok yesterday, according to data compiled by Bloomberg. The currency will trade between 32.50 and 32.95 next week, CIMB Investment's Suresh said.

The baht has declined 5 percent this quarter, the third- worst performance among Asia's 10 most-active currencies, as investors sold stocks and fuel importers bought dollars.

The peso was the second-worst performer in the region this week. The Philippines imports nearly all its energy requirements and higher oil prices caused the trade deficit to widen to $928 million in March from $79 million a year earlier.

Oil `Spooked Sentiment'

The central bank this week raised its key interest rate for the first time in more than two years after record energy and rice prices pushed inflation to a nine-year high last month.

``Higher oil prices spooked sentiment in the peso despite a rate hike by the central bank yesterday,'' said Catherine Tan, head of regional foreign exchange at Thomson Financial Asia. ``It will put a dent into the trade deficit outlook and may cause a second-round inflation impact.''

The local currency lost 0.2 percent yesterday to 44.127 per dollar, extending its weekly loss to 0.9 percent, according to Tullett Prebon Plc.

The increase in borrowing costs may help strengthen or stabilize the peso, Deputy Governor Diwa Guinigundo said June 5.

Indonesia's rupiah was little changed from last week amid speculation Bank Indonesia will limit its losses to prevent inflation from accelerating.

Bank Indonesia

The currency weakened 2.9 percent in the past three months as crude oil rose by more than a fifth during the same period to $131.07 a barrel in New York, increasing import costs for Southeast Asia's largest economy.

Bank Indonesia on June 5 raised the benchmark interest rate to 8.5 percent from 8.25 percent, less than the half-percentage- point increase expected by economists in a Bloomberg survey.

The central bank ``will opt to protect the stability of the rupiah'' after it raised its borrowing cost, said Masahiro Gao, vice president of the treasury unit at PT Bank Mizuho in Jakarta. ``If rupiah goes down, BI will act.''

The local currency traded at 9,310 yesterday, compared with 9,322 last week, according to data compiled by Bloomberg.

Central bank Governor Boediono said this week he will use all monetary tools to fight inflation. Consumer price gains in 2008 may accelerate to 12.5 percent before slowing to 6.5 percent in 2009, he said.

Indonesia's inflation reached 10.4 percent in May, the fastest in 20 months, after the government raised local fuel prices by 29 percent on May 24 to reduce oil subsidies.

Vietnam's `Currency Crisis'

Vietnam's dong may fall 10 percent by year-end as the government seeks a gradual depreciation to avoid a ``currency crisis'' and a sudden devaluation, according to Calyon, the investment banking unit of Credit Agricole SA.

Accelerating inflation, a widening trade deficit and a near 60 percent slide in local stocks this year have seen the currency decline for three straight months, the longest losing streak since August. The dong, which is allowed to trade within 1 percent on either side of a daily reference rate, will weaken 29 percent in the next 12 months according to trading of non- deliverable forwards.

``The dong depreciation pressure remains strong,'' Calyon strategists including Sebastien Barbe wrote in a research note yesterday, which he confirmed in a telephone interview. ``We expect the dong to soften further to about 18,000 versus the dollar by the end of 2008.''

The dong fell 0.2 percent this week to 16,272.5 versus the dollar, according to data compiled by Bloomberg. The currency has weakened 1.7 percent in 2008. Offshore 12-month non-deliverable forwards traded at 23,850 yesterday.

Elsewhere, the Taiwan dollar added 0.3 percent to NT$30.335 this week. Singapore's dollar was little changed in the week at S$1.3647, while Malaysia's ringgit fell 0.6 percent to 3.2585.

-- Yahoo Finance 2008-06-08

[cloudhopper]

I wouldn't know if this is a blip or a new trend but if the stock market and real estate values (in THB), and the Baht itself continue to fall, it would seem that there would be increasing incentive for expat profit taking and further trend reinforcement.

[slim]

Lets hope for us ex-pats living out here the baht weakens further.

Its been strengthening (alarmingly) since the end of last year.

It'd be nice if it went back up to the 70b to the pound.

exchange_rates.xls

Edited June 8, 2008 by slim

[canuckamuck]

Just my thoughts

[london]

I'm sorry to say that I have read so many posts that insist the Thai Baht has strengthened over the years, and yet I can remember that in 1997 it was 25-28 range to the $US. At present I believe its around 32-33 range...which would imply that it has actually weakened.....significantly.

Take inflation into account, then the weakness is quite substantial.

I remember when I bought my first property here that it was 24 baht=$US. Very expensive in comparison to today.

IMHO, I would be taking advantage of any weakness in any of the Asian economies.....to invest for the longer term. Certainly at todays rates, this seems like an opportunity.....and "yes"... I am investing.

[ausiekid]

Lets hope for us ex-pats living out here the baht weakens further.

Its been strengthening (alarmingly) since the end of last year.

It'd be nice if it went back up to the 70b to the pound.

exchange_rates.xls

Is't your attitude a little selfish?

[slim]

Lets hope for us ex-pats living out here the baht weakens further.

Its been strengthening (alarmingly) since the end of last year.

It'd be nice if it went back up to the 70b to the pound.

exchange_rates.xls

Is't your attitude a little selfish?

No - makes no difference to the general public what the exchange rate is - makes a lot of difference to me and my Thai family - isn't your attitude a little niaive ?

Edited June 8, 2008 by slim

[thaigene2]

Actually I was a bit annoyed that the prices of imported products weren't dropping (e.g. since presumably they were purchased by Thai importers who were gaining by paying in US dollars). The price of my favorite whiskey actually increased as did some other food items. Funny how that works.

[bonobo]

I am ferventaly hoping that it declines further. We make large plastic bags, and with oil shooting up, our raw materials have gone up 50% since a year ago, and with an explosion at a monopolymer plant in China last week, we expect it to go up further. Since we compete with paper in North America (and paper has not gone up nearly as much), the strong baht has really hurt sales. With a weaker baht, even with higher oil prices, we can compete a little better and keep our workers employed (and possibly even hire new ones.)

We are now looking to the EU, but the market for this type of bag is on the verge of exploding in the US, and we want to be part of that.

[soundman]

Actually I was a bit annoyed that the prices of imported products weren't dropping (e.g. since presumably they were purchased by Thai importers who were gaining by paying in US dollars). The price of my favorite whiskey actually increased as did some other food items. Funny how that works.

Collusion, price fixing & agrred profiteering.

[marquess]

Actually I was a bit annoyed that the prices of imported products weren't dropping (e.g. since presumably they were purchased by Thai importers who were gaining by paying in US dollars). The price of my favorite whiskey actually increased as did some other food items. Funny how that works.

It always goes up, but very rarely ever down!

[Kaojai]

Actually I was a bit annoyed that the prices of imported products weren't dropping (e.g. since presumably they were purchased by Thai importers who were gaining by paying in US dollars). The price of my favorite whiskey actually increased as did some other food items. Funny how that works.

It always goes up, but very rarely ever down!

The cost of shipping things locally, and even more so internationally, has sky rocketed. I agree that retailers are far more ready to raise prices than to lower them, but the cost of importing goods is not in some simple inverse linear relationship with the exchange rate.

[Naam]

Actually I was a bit annoyed that the prices of imported products weren't dropping (e.g. since presumably they were purchased by Thai importers who were gaining by paying in US dollars). The price of my favorite whiskey actually increased as did some other food items. Funny how that works.

It always goes up, but very rarely ever down!

The cost of shipping things locally, and even more so internationally, has sky rocketed. I agree that retailers are far more ready to raise prices than to lower them, but the cost of importing goods is not in some simple inverse linear relationship with the exchange rate.

a U.S. made 2HP pool pump was 18,000 Baht 2½ years ago when USD/THB rate was 41. now we are at 33 and the same pump is quoted at 28,500 Baht

[basjke]

I am ferventaly hoping that it declines further. We make large plastic bags, and with oil shooting up, our raw materials have gone up 50% since a year ago, and with an explosion at a monopolymer plant in China last week, we expect it to go up further. Since we compete with paper in North America (and paper has not gone up nearly as much), the strong baht has really hurt sales. With a weaker baht, even with higher oil prices, we can compete a little better and keep our workers employed (and possibly even hire new ones.)

We are now looking to the EU, but the market for this type of bag is on the verge of exploding in the US, and we want to be part of that.

Don't you forget that if the baht weakens further the price of your raw materials will rise even more.

[geriatrickid]

Maybe this adjustment will stabilize the tourist trade. Obviously not enough to offset the cost of airfares, but if it can keep the cost of everything else down, then Thailand becomes within reach of many westerners that were priced out in the last year.

[Thaddeus]

I am ferventaly hoping that it declines further. We make large plastic bags, and with oil shooting up, our raw materials have gone up 50% since a year ago, and with an explosion at a monopolymer plant in China last week, we expect it to go up further. Since we compete with paper in North America (and paper has not gone up nearly as much), the strong baht has really hurt sales. With a weaker baht, even with higher oil prices, we can compete a little better and keep our workers employed (and possibly even hire new ones.)

We are now looking to the EU, but the market for this type of bag is on the verge of exploding in the US, and we want to be part of that.

Don't you forget that if the baht weakens further the price of your raw materials will rise even more.

But for most of the population of Thailand that will not be a great concern as their main raw materials are rice, chicken and alcohol. Two of which are completely home-grown already and the other is mostly, but could be totally if needs must.

[Seneque]

Watch the vietnamese dong ... the next devaluation, if any, will come from there and hit all the asian currencies ...

[Naam]

Watch the vietnamese dong ... the next devaluation, if any, will come from there and hit all the asian currencies ...

and then the sky will fall

[PeaceBlondie]

Watch the vietnamese dong ... the next devaluation, if any, will come from there and hit all the asian currencies ...

and then the sky will fall

Yes, indeed, Naam. Those traders in London, New York and Chicago speak about the dong as if King Kong fell into the klong in Hang Dong, and dong is more important than dung, and quite a bit cheaper. Let's see if dong becomes as valuable as the old Turkish lira. By far more important than the pound, dollar, euro, etc.

Seriously, does the dong occupy even a fiber of any basket of Asian currencies? Or is right down there with the kip?

[george]

This topic continues here:

Central Bank Jumps In To Strengthen Falling Baht

http://www.thaivisa.com/forum/index.php?showtopic=193561

[ludosiam]

Watch the vietnamese dong ... the next devaluation, if any, will come from there and hit all the asian currencies ...

and then the sky will fall

Yes, indeed, Naam. Those traders in London, New York and Chicago speak about the dong as if King Kong fell into the klong in Hang Dong, and dong is more important than dung, and quite a bit cheaper. Let's see if dong becomes as valuable as the old Turkish lira. By far more important than the pound, dollar, euro, etc.

Seriously, does the dong occupy even a fiber of any basket of Asian currencies? Or is right down there with the kip?

Wouldn't a devaluation of the dong make exports out of vietnam cheaper than Thailand? Surely would have some effect on the Thai economy I think.

[BedlamBound]

I am ferventaly hoping that it declines further. We make large plastic bags, and with oil shooting up, our raw materials have gone up 50% since a year ago, and with an explosion at a monopolymer plant in China last week, we expect it to go up further. Since we compete with paper in North America (and paper has not gone up nearly as much), the strong baht has really hurt sales. With a weaker baht, even with higher oil prices, we can compete a little better and keep our workers employed (and possibly even hire new ones.)

We are now looking to the EU, but the market for this type of bag is on the verge of exploding in the US, and we want to be part of that.

So it is you resposible for all these plastic bags across the globe taht will take hundreds of years to decompose.....hope you're proud.

[bonobo]

I am ferventaly hoping that it declines further. We make large plastic bags, and with oil shooting up, our raw materials have gone up 50% since a year ago, and with an explosion at a monopolymer plant in China last week, we expect it to go up further. Since we compete with paper in North America (and paper has not gone up nearly as much), the strong baht has really hurt sales. With a weaker baht, even with higher oil prices, we can compete a little better and keep our workers employed (and possibly even hire new ones.)

We are now looking to the EU, but the market for this type of bag is on the verge of exploding in the US, and we want to be part of that.

So it is you resposible for all these plastic bags across the globe taht will take hundreds of years to decompose.....hope you're proud.

Sure am.

We just came back from Interpack in Germany where we were placed in the, yes, the GREEN pavillion. Seems like the entire EU wants to use re-usable shopping bags, just like we make for a major environmentally friendly US chain.

And yes, all our bags are recyclable.

So, hmm, we employ 900 Thais and 250 Vietnamese, we do not pollute the water like paper does, we can be recylced, and we are considered green? Yes, I would say I am proud of what we do.

And, of course, you have never used any products which come from petrochemicals, right?

Edited June 9, 2008 by bonobo

[chickencurry]

I am ferventaly hoping that it declines further. We make large plastic bags, and with oil shooting up, our raw materials have gone up 50% since a year ago, and with an explosion at a monopolymer plant in China last week, we expect it to go up further. Since we compete with paper in North America (and paper has not gone up nearly as much), the strong baht has really hurt sales. With a weaker baht, even with higher oil prices, we can compete a little better and keep our workers employed (and possibly even hire new ones.)

We are now looking to the EU, but the market for this type of bag is on the verge of exploding in the US, and we want to be part of that.

So it is you resposible for all these plastic bags across the globe taht will take hundreds of years to decompose.....hope you're proud.

Sure am.

We just came back from Interpack in Germany where we were placed in the, yes, the GREEN pavillion. Seems like the entire EU wants to use re-usable shopping bags, just like we make for a major environmentally friendly US chain.

And yes, all our bags are recyclable.

So, hmm, we employ 900 Thais and 250 Vietnamese, we do not pollute the water like paper does, we can be recylced, and we are considered green? Yes, I would say I am proud of what we do.

And, of course, you have never used any products which come from petrochemicals, right?

Very impressive (seriously)

[bonobo]

I am ferventaly hoping that it declines further. We make large plastic bags, and with oil shooting up, our raw materials have gone up 50% since a year ago, and with an explosion at a monopolymer plant in China last week, we expect it to go up further. Since we compete with paper in North America (and paper has not gone up nearly as much), the strong baht has really hurt sales. With a weaker baht, even with higher oil prices, we can compete a little better and keep our workers employed (and possibly even hire new ones.)

We are now looking to the EU, but the market for this type of bag is on the verge of exploding in the US, and we want to be part of that.

Don't you forget that if the baht weakens further the price of your raw materials will rise even more.

Yes, you are right. But only 30% of our costs come from our raw materials. Unless our other costs skyrocket, a falling baht will make us more competitive.

Our domestic sales are pretty much fixed. We are one of two companies which can make these kinds of bags, and the other one is focussing on the export market almost exclusively. So our Thai customers have to come to us, as they did through the 97 crisis, for example. We have a long and valued relationship with them.

But it would be nice to raise our exports to maybe 40% of sales, and this helps.