Central Bank Jumps In To Strengthen Falling Baht

[george]

Central Bank jumps in to strengthen falling baht

BANGKOK: -- The Bank of Thailand on Monday intervened in the foreign exchange market to halt a rapid slide of the baht currency, officials said.

Suchada Gillakul, assistant to the central bank's governor, said the intervention was deemed necessary after the baht dropped to 33.41 to the dollar Monday morning, its lowest rate in five months. It had closed Friday at 32.96.

"We will investigate whether foreign investors are speculating on the baht," she told reporters.

After the intervention, the baht traded at 33.22 to the dollar Monday afternoon.

Like most Asian currencies, the Thai baht has steadily appreciated against the dollar, gaining almost 20 per cent over the past two years before starting to weaken last month in the wake of rising inflation, growing political instability, declines on the stock market and slowing growth projections.

By midday Monday, the Stock Exchange of Thailand index had fallen 1.3 per cent largely in response to a dramatic fall on Wall Street Friday.

-- dpa 2008-06-09

Related link:

Thai Baht Currency Exchange Rates

[Khun Jean]

Ah, the first signs that the baht decline is inevitable.

[manutoo]

And last year, they were intervening to prevent it to rise, while it was around this exact same level...

[tropo]

Can anyone figure this out?

Late 2006 when it gained to 35 they were panicking and trying to weaken it to keep it above 35, but now that it's weakened from about 31 to 33 they want to strengthen it again.

[ludosiam]

Can anyone figure this out?

Late 2006 when it gained to 35 they were panicking and trying to weaken it to keep it above 35, but now that it's weakened from about 31 to 33 they want to strengthen it again.

Fuel was much cheaper at that time. lower Baht = higher fuel price = increased inflation. I'm not an expert in this field but wouldn't increased inflation put pressure on the Baht again leading to a longer downward trend? Don't get me wrong - I'm an exporter and paid in USD, surely like the trend after all the increases from my supplier.

[harleyclarkey]

They just don't have a clue..either this or the previous incumbants. Remember the fiasco with the 30% deposit thing??

[ericB]

Seven years I live here.

From 2002 up to 2006, 1 $ was given more than 40 bht (I do remenber 42bht for the start of 2005).

People were happy : expats like me who were getting salary in us$, tourists were happy, shopkeepers also as we all have more baths to spend, and I do remenber export society were also happy.

Right now, at 1$ for 32 bht, people like me are loosing money , export is totally down since last year, less tourist as the destination is becoming expensive for the quality given, and the shopkeepers are having hard time to make some money.

Why not let the market itself regulate it. I was supposing it was a capitalist system. This way to act is not by anyway a capitalist one , but simply a way to protect the economical interest of a very small part of the population.

[ray23]

I expected this today it moved rapidly, remember what this country went through in 97 I am positive they will do anyhting they can to prevent that. But with inflation as it is, going to be a tough job. As was pointed out this a definite turn around from as little as a year ago.

It also tells me that Asia isn't bullet proof a everyone was saying. Oil is killing the world at the moment. Some of that is supply, some is the dollar, some is speculation. Not going to be eay for any country.

I noted that even though the dollar was showing 33.30 this morning I still only got 33.02 just like I got on saturday at the ATM.

The Thai governmentan really shoot themselves in the foot with investors if they are not very careful.

I have seen articles trying to bla this on the politics on the country I don' think so.

Any one have a clue what the national debt in Thailand is tday and what that compared to two years ago?

[froggshw]

Bring it on...lets see 72 baht to the pound again..or more

[monkfish]

They will probably blame this on those protests in BKK

[ChiangMaiThai]

Bring it on...lets see 72 baht to the pound again..or more

I've got large debts in US Dollars and I'm paid in Baht. I'm pulling for a swing in the other direction. Bring on 10 Baht to the Dollar!

[john b good]

They just don't have a clue..either this or the previous incumbants. Remember the fiasco with the 30% deposit thing??

"They just don't have a clue" never a truer word said.

More clowns that the Great Moscow Circus

[FarangUK]

i agree with ray23! I hope the baht/sterling rate does go over 70 or who is going to buy all these thousands of condo's that are going up?

And it would also attract investor with time deposits if the rate went over 5%. 2007 it was 4.75% but this year only 2.3%.............

Crazy

[laocowboy2]

I expected this today it moved rapidly, remember what this country went through in 97 I am positive they will do anyhting they can to prevent that. But with inflation as it is, going to be a tough job. As was pointed out this a definite turn around from as little as a year ago.

It also tells me that Asia isn't bullet proof a everyone was saying. Oil is killing the world at the moment. Some of that is supply, some is the dollar, some is speculation. Not going to be eay for any country.

I noted that even though the dollar was showing 33.30 this morning I still only got 33.02 just like I got on saturday at the ATM.

The Thai governmentan really shoot themselves in the foot with investors if they are not very careful.

I have seen articles trying to bla this on the politics on the country I don' think so.

Any one have a clue what the national debt in Thailand is tday and what that compared to two years ago?

While the USD/THB rate may be similar to a year ago, the economic background is very different. At that time the concern was with protecting exporters against competition from other Asian countries where appreciation of the currency had been lower than that of the THB. here was also concern that massive speculative inflows of FX to buy either THB or Thai securities were imminent. Hence the barriers and intervention. What mattered (and still matters) really is the cross rates of the Thai Baht against the Malaysian Ringgit, Philippine Peso, Yuan etc etc.

Since that time USD has fallen sharply, including against Yuan and M$ etc. So Thai exporters not under quite so much pressure from the exchange rate (they are under pressure of course - in part due to higher input costs in the form of energy, fertilizers etc). Danger now is seen as being inflation, and this is exacerbated by a weak currency. So now they are seeking to defend the THB.

No repeat of 1997 likely however as overhang of (a) FX borrowing by Thai corporates and ( forward FX positions selling the vanishing FX reserves no longer applies.

[Robbie Dye]

Bring it on...lets see 72 baht to the pound again..or more

With the dependence on tourism I have no doubt we will get to 70 at least!

[dreamtime]

I'm betting no one will be buying those condos. I'll stand alone with this prediction. Everyone seems to think the condo market can only go straight up. Nothing goes up forever. With the real estate decline in the USA and worldwide real estate sky high due to inflation which is creating bubbles everywhere, Thailand real estate will follow at some point in time. When the liquidity stops flowing Thai real estate will deflate too.

S

i agree with ray23! I hope the baht/sterling rate does go over 70 or who is going to buy all these thousands of condo's that are going up?

And it would also attract investor with time deposits if the rate went over 5%. 2007 it was 4.75% but this year only 2.3%.............

Crazy

Edited June 9, 2008 by dreamtime

[AsiaCheese]

Seven years I live here.

From 2002 up to 2006, 1 $ was given more than 40 bht (I do remenber 42bht for the start of 2005).

People were happy : expats like me who were getting salary in us$, tourists were happy, shopkeepers also as we all have more baths to spend, and I do remenber export society were also happy.

Right now, at 1$ for 32 bht, people like me are loosing money , export is totally down since last year, less tourist as the destination is becoming expensive for the quality given, and the shopkeepers are having hard time to make some money.

Why not let the market itself regulate it. I was supposing it was a capitalist system. This way to act is not by anyway a capitalist one , but simply a way to protect the economical interest of a very small part of the population.

The market regulating itself is a nice theory that goes slightly ugly when large-scale speculation is at work... "The market" (= demand) says there's enough oil. Why, then, is the price going through the roof (and into orbit)?!? Same same, but different.

[laocowboy2]

Bring it on...lets see 72 baht to the pound again..or more

With the dependence on tourism I have no doubt we will get to 70 at least!

While tourism provides a lot of higher quality jobs in coastal areas and in the North, the value of tourism to the economy is smaller than you would possibly think given the rise of Thailand as an industrial exporter - I had to do some research on this at one time. Tourism is also a hight FX input industry (imported food and drink, imported kitchens, high energy usage etc) so net benefit to FX position is limited. Auto components and electronics are much more critical - and these are areas where slight exchange rate differences really matter as you can cut a shift from your Thai factory and replace by an additional one at your Penang factory.

[MartinBKK]

Hope it tanks.

I for one wouldnt mind seeing 50 Baht to the dollar

[fauxie]

Ah, I remember the days when my 200GBP daily withdrawal limit would see me getting nearly 15k out at the ATM. In recent times I've had to settle for 12k. That's a big difference when you're withdrawing many times per month!

I'd be quite chuffed with the rate rising to anything over 66 baht to the pound these days, but over 70 again would be dreamland once more.

[robblok]

Ah, I remember the days when my 200GBP daily withdrawal limit would see me getting nearly 15k out at the ATM. In recent times I've had to settle for 12k. That's a big difference when you're withdrawing many times per month!

I'd be quite chuffed with the rate rising to anything over 66 baht to the pound these days, but over 70 again would be dreamland once more.

Its not the bath its the weak pound. With the EURO i have no problems at all. The pound is just not as strong as it used to be.

[dreamtime]

Ah, I remember the days when my 200GBP daily withdrawal limit would see me getting nearly 15k out at the ATM. In recent times I've had to settle for 12k. That's a big difference when you're withdrawing many times per month!

I'd be quite chuffed with the rate rising to anything over 66 baht to the pound these days, but over 70 again would be dreamland once more.

The THB should increase relative to the USD as the USD inflation rate will be much higher. But when you add in the political nonsense here then anything could happen.

[Heng]

This is one popular topic.

[froggshw]

well when (if) it does hit the 70baht/pound again.....I will be moving a large lump of sterling....twice in the past I have foolishly not moved money when I should have..here's to watching exchange rates.

[Ga-gai]

Falling Thai Baht...?

I'll bet retired americans are happy!

Not so good for the guys who are on their way home, selling houses, condos etc. Not so good as well for petrol and imported products and food. Even if many have their retirement paid in USD, the happiness is probably short lived. Since Thailand is way passed to be a self sufficient country, a weak Thai Baht will increase inflation and overall prices for sure.

[ray23]

I think what really makes this unusual is the dollar and the Baht down at the same time. I've never seen that before

[JetsetBkk]

This is one popular topic.

885 users! I wonder how many of them have money outside Thailand and are breathing a small sigh of relief?

[waldpyk]

move now , today

change pounds to euro's

and ofcourse don;t even touch dollars

[Foggy Bottom]

Ah, I remember the days when my 200GBP daily withdrawal limit would see me getting nearly 15k out at the ATM. In recent times I've had to settle for 12k. That's a big difference when you're withdrawing many times per month!

I'd be quite chuffed with the rate rising to anything over 66 baht to the pound these days, but over 70 again would be dreamland once more.

Its not the bath its the weak pound. With the EURO i have no problems at all. The pound is just not as strong as it used to be.

Nope - sorry mate, you've got that wrong

If you compare the Pound to most currencies, it's about where it was a decade ago

There are a noteable few where things have gone haywire .....

The Pound to the Dollar had gone from the $1.66 where it was for most of the 1990's to $2 and that's more due to the dollar weakening than to the Pound strengthening.

The Pound to the Euro has gone from the roughly Eu2.00 of the 1990s to roughly 1.66 now and that's due to a strengthening Euro rather than a weakening Pound

The Pound to the Aussie Dollar has gone from around $4.00 Aussie to $2.00 (and a tad) across the same period - due to the resources boom in Australia and China gobbling up all the Aussies can export.

If you just look at those four currencies, then in the last decade the USD has tanked, the Pound has weakened a little, the Euro has gained a little and the AUD has soared. But those four don't make the whole global economy. Across all currencies as a whole, the Pound has been stable, but roughly a dozen currencies in total have shown large swings against it, including the Baht, which has dropped from an ATM rate of 76.5 to the Pound in December 2006 to 60.2 last month - it's now rebalancing.

-----

Naturally, I still blame lots of speculation triggered by the Shin sale to Temasek and that ominous reason for the sale given by Dr T himself, "It will all become clear over time". There was simply too large a tranche of cash under the control of one man during a volatile time, and I've no doubt he's been able to cause some of the turmoil in the market, but by no means all of it.

Some of his policies are still reaping reverse-benefits too -

- Paying off the IMF the summer before the tsunami (with the famous quote that foreigners had been removed from the Thai financial system) when everyone including the BoT governer said not to, and to just continue with the repayments.

- The 1 million baht village funds, with a lot of loans still unpaid and debt still crippling farmers

- The cost of rush finishing Swampy and other major infrastructure projects

- The government subsidising Diesel during his first term in office and seriously weakening reserves

- Converting the nation to a consumerist society instead of a self-sufficiency one

- His headlong rush to attract large scale / minimal manpower industrial investors whilst simultaneously disadvantaging the small scale / maximum manpower, foreign, business investors

.... and so the list goes on.

----

Oil and exports are not the only causes of what's happening in Thai economics nowadays, nor of what's happening to exchange rates.

Also, though few may have noticed it, this time of year ALWAYS sees a weakening of the baht due to seasonal (agri) export factors and due to tourism factors (lull between spring and summer arrival peaks) - May is usually the low point, but this year it's a couple of weeks late.

Mai pen rai, situation normal, different date same result

just my 25 satang's worth.

Gaz

[cclub75]

The probable cause of this panic is there thailand is a net importer of oil, coal and natural gas

And by larges volumes.