Central Bank Jumps In To Strengthen Falling Baht

[LaoPo]

Euro - G B P - U S D Versus Thai Baht

12 month charts:

http://www.thaivisa.com/forum/index.php?sh...t&p=2024482

LaoPo

[peekint]

I found it interesting in the article that the finance minister is looking to see if FOREIGNERS are speculating in the Baht. Having spent some years currency trading in HK, believe me, it is both domestic and overseas Thai individuals and companies that are the biggest speculators in the currency. For others, the currency is just not convertible enough - and the risk is way too high with few ways to hedge it.

Truly, the baht belongs at somewhere between 35 and 45 baht/$ when benchmarked against comparable economic performance. The 30-35 baht range is only a result of specific manipulation in order for some wealthy individuals to expatriate funds with the highest possible return. If those transactions are complete, or if those individuals foresee the need to repatriate funds, one might expect that the baht will either naturally devalue to its market rate, or be manipulated to an even weaker position.

That said, aside from the inflationary aspects of the devaluation, the weakening of the baht can only be good for the Thai economy if the economy is left to its own devices. Even the inflation will tend to push the economy in a direction toward higher productivity. Wish that could be said for government and pseudo-state enterprises like PTT. SME exporters have been suffering here for a long time with this unreasonably strong baht, and it's about time they had a chance to increase their profits and invest in the future.

There is a further firestorm coming for those that think a strong baht can be maintained. Bernanke, quoted in the back pages, has alluded to the fact that the dollar is too weak and inflation is rearing its head in the USA. Once the election is over, and especially if a Democrat is elected, the dollar will appreciate 10-25% in the first six months of 2009. There's not enough money in the Thai coffers to fend off that much pressure.

All my Thai friends are busy buying dollars and pounds like crazy (personally, I think the dollar is a better bet - the pound will be battered a bit after the election as well), seeing the writing on the wall.

So, while the ministers are franticly playing "Clue" wondering if Mr. Foreign Investor did it with the Knife in the Kitchen, smart business folks are looking under their own mattresses.

[Zappadappa]

seems most have only their self interest at heart

Pity the indigenous folk who can but watch their basic self interests (food fuel family) fade into red!

[nikster]

Foreigners always get the blame - just a sign of the self-defeating nationalist attitude of many Thais in the power circles, which I think is what really holds this beautiful country back more than anything else.

Anyway it's about time there's some good news for the USD, we USD-paid people have been suffering a 30% income loss in the last 2 years.

You can buy insurance against currency fluctuation by splitting investments between THB and (back home). I always weigh back home a bit more since the U.S. democracy can survive even a complete disaster like Bush for 8 years - even if just barely - whereas in the LOS, I always have the feeling the country is balancing at the edge of an abyss. Anything can happen.

If the USD goes down, cut the spending and wait for better times. Som-tam is still cheap, imports adjust over time(*). If the THB goes down a lot I'll start building again... roll with the waves

(*) For example electronics. Anything that's made outside Thailand will adjust to THB fluctuations pretty quickly. When the THB goes up, prices for goods made outside Thailand go down. And other stuff that's made in Thailand and is going up without mercy usually has a pretty low base level. A 30% increase on $1 for som-tam is still only $1.30. Livable. At least that's how I stayed happy Gasoline prices? World-wide problem.

[nikster]

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.

No. I don't get it either. You'd think now they would be jumping with joy. I guess - as someone posted above - the reason could be that the too-high THB at the moment buffers the sky-high oil prices a bit from Thailand. If the crazy oil prices meet a weak baht, inflation will be unstoppable.

I don't think interventions to keep the baht strong can work at all. All they'll do is put money in the pockets of speculators. Which... considering that TIT... might actually also be a reason. Ugh. Maybe Taksin's making a killing and his friends are helping out.

In any case, weakening a strong Baht is a lot easier than strengthening a weakening Baht. In the first case, you can just fire up the printing presses and print more money. In the second, you have to invest real money and are up against trillions of dollars from speculators from all over the world which is a losing proposition.

[calmichael]

With the high cost of fuel, the cost of shipping will add a huge surcharge to the cost of exporting goods. Thai exporters are now facing a 15% "surcharge" on shipped goods. Add that to the economic slowdown in the States - one of Thailand's biggest customers, the latest inflation numbers - much larger than the authorities admit to, the high cost of fuel - which Thailand will not subsidize forever, and the beginning of the popping of the euro property market bubble, and the baht can only weaken.

[MacauThai]

The free market will do what it wants to do.

The funny thing about these financial unswings and downswings is that you know certain people are making a bundle. Didn't one famous Thai man double his bank balance in 1997?

Also, you might want to see what is happening in Vietnam at the moment.

Edited June 9, 2008 by MacauThai

[Jose]

All fiat currencies are constantly falling - monetary inflation, the central banks' hidden tax (or otherwise public theft), makes this inevitable.

Comparing currencies against each other is a dangerous distraction.

More here.

[Oliver Reed]

Has everybody missed the obvious conspiracy theory here??...a certain ex prime minister, with huge wads of cash, leaves the country, along with all of the millions that werent frozen, and converts in to dollars, at a time when the dollar is weak against the baht...Same ex PM, is the root cause of political unrest and instability, and pulls the strings that in turn contribute to the baht going on the slide..in the meantime he buys a high profile football club to raise his profile worldwide, and more or less guarantees his untouchable status (As perfected by a certain Chelsea owner)....hey presto, baht goes in to freefall, government look like they cant handle it, more political protests, country goes in to turmoil, and in rides a certain former PM on his white horse, offering stability and lines like 'Things were better on my watch'...new elections called, the Thai people look to their saviour, all the protests stop, he regains office, the baht strengthens as a result, and he converts all his dollars back in to baht at a huge profit....and we all lived happily ever after, until the next coup

[CaliforniaGirl]

I love it!!!! At least one currency that falls compared to the US Dollar! Going to Europe killed us, so at least we can be happy shopping in Thailand! :-)

[inthepink]

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

Yes how silly the Thai government are. They really should look to the American government as a shining example of fiscal management. Maybe they could also lure a few Bear Stearns senior management figures away to advise them in future. Or perhaps there are some senior staff members of Northern Rock in the UK who could come and give some valuable lessons on money management.

Edited June 9, 2008 by inthepink

[wrecker]

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

Of course it is inevitable. Either soldiers start shooting or extortionists like the PAD and their criminal leader Chamlong will take care of it. if you have 2000 people who block roads and blackmail courts and governments because they have no clue how a democracy is working, foreign investors will give the finger, you do not have to be a speculator to understand this.

Given the fact that the US economy is mismanaged a decline of the baht in comparison with the dollar tells the full story.

[Heng]

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?

I'm sure it'll be fine either way.

[inthepink]

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

What on earth are you talking about? The pound / euro rate today is about 1.25....nowhere near 1.66

[gadinaz]

Don't get me wrong - I'm an exporter and paid in USD, surely like the trend after all the increases from my supplier.

Quite right. The trend for the USD has been down:

Eight Year US Dollar

Since it's high of 121 back in 2001 & 2002, the USD has lost 40% of it's value. Good for Exporters - Bad for Expats who's income is in Dollars.

If I'm correct ... we should experience, at least for the short term, a bottom in the US Dollar and of course that translates to a weaking of the Thai Baht as well as other International Currencies.

US Dollar last 72.38

[Naam]

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!

or THB 163.85 for one GBP... WIFE! why did you take that bottle of Port away?

[Naam]

Don't get me wrong - I'm an exporter and paid in USD, surely like the trend after all the increases from my supplier.

The trend for the USD has been down

you don't say!

[Naam]

Has everybody missed the obvious conspiracy theory here?

no! we all know that Osama bin-Laden and al-Qaeda are playing their dirty currency tricks.

[Naam]

Foreigners always get the blame

foreigners deserve that blame. it is a well known fact that foreigners are destroying Thailand's economy by refusing to pay 10 Baht for a baht-bus ride.

[goldfish]

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!

or THB 163.85 for one GBP... WIFE! why did you take that bottle of Port away?

Give Naam his bottle of port back and take away his computer please!

[MacauThai]

when the Dems win the election, short USO and go long USD.

Bush and company is stealing every last penny they can get their hands on before the election.

[Huey]

I am So praying that it drops, and drops hard, I really don't even care how hard either just so long as it dosn't stop my condo from being built like in 97 I'm cool.

[Naam]

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!

or THB 163.85 for one GBP... WIFE! why did you take that bottle of Port away?

Give Naam his bottle of port back and take away his computer please!

that's okay with me. got four of them, but only three running at a time.

[thaipapajim]

Given the current situation, I think you should inflate that to at least 50 Satangs

[MacauThai]

I am So praying that it drops, and drops hard, I really don't even care how hard either just so long as it dosn't stop my condo from being built like in 97 I'm cool.

i am hoping to see many many Thais fired and in debt, bankrupt, homeless, etc. Then I can snatch up all the cheap real estate.

[moe666]

Last year everyone singing the blues as Thai Baht increased in Value against major currencies and slamming the Thai government. Now the Thai Baht is declining in value and the Thai Government is being slammed again. I get it you guys donot know what you want.

Just remember what goes up eventually comes down, ask all the housing speculators in the US.

[Gary A]

When the baht was very strong they wanted it to weaken. Now that the baht has weakened some, they want to strengthen it. What DO they want?

[ray23]

Interesting home sale in april in the US up 6.3%

Dollar up 106.29 to the Yen

I think we will see baht at 34 soon.

How in the world can the BOT stop that, it's not just Thailand

[Johpa]

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.

What?!? You think economics is some sort of science to be "figured" out? Have you not noticed that even Nobel laureates argue over basic assumptions? Ok, some physicists may argue over how many theoretical dimensions extrapolate from string theory, but you don't see them arguing too much over more fundamental basic issues involving Newtonian mechanics. Heilbroner got it right. economists are worldly philosophers and not scientists, philosophers who diddle with numbers.

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.

And you think that the capitalist system is not set up to protect the economical interest of a very small part of the population? Other than hunter gathering societies, is there any economic system that did not set out to protect an economic elite?

So some of you folks actually believe in "Free" markets. Do you still believe in the tooth fairy as well?

[MacauThai]

Interesting home sale in april in the US up 6.3%

Dollar up 106.29 to the Yen

I think we will see baht at 34 soon.

How in the world can the BOT stop that, it's not just Thailand

the free market will do what it wants but the BOT should be able to manipulate the rate 5-10% higher than the offshore rate as they were previously making it 5-10% lower than the offshore rate, as they have massive capital reserves in USD + THB.