Thai Baht Not The Sweet Deal Anymore

[ray23]

Thai Baht Trades Near Six-Month Low on Political, Economic Woes

By Shanthy Nambiar and Patricia Lui

July 10 (Bloomberg) -- The Thai baht traded near a six- month low on speculation probes of government officials will erode investor confidence amid an economic slowdown.

The nation's highest court this week convicted a senior member of Samak's People Power Party of buying votes in the December polls and judges yesterday ruled that Public Health Minister Chaiya Sasomsup is ineligible to serve in the Cabinet because he failed to disclose his assets properly. Further cases involving cabinet members, and former Prime Minister Thaksin Shinawatra and his wife, are scheduled this month.

The baht fell 0.1 percent to 33.67 per dollar as of 11:39 a.m. in Bangkok, according to data compiled by Bloomberg. It weakened to 33.77 yesterday, the lowest since Dec. 28, and this month's 0.7 percent drop makes it the second-biggest loser among the 10 most-active currencies in Asia outside Japan.

``The baht, you continue to avoid,'' said Craig Chan, a currency strategist at Lehman Brothers Holdings Inc. in Singapore. ``It started from a very good story, from when they liberalized the capital account, to now a very horrible story. The numbers coming out are deteriorating sharply, the politics is awful, Bank of Thailand is lagging behind inflation.''

Official figures show inflation is at a decade-high, fanning concern the central bank will raise borrowing costs at a July 16 policy meeting, and Finance Minister Surapong Suebwonglee said last month that economic growth in 2008 may trail the government's 6 percent forecast.

Stocks Slump

The deteriorating outlook is also taking its toll on stocks, with the benchmark SET Index losing as much as 1 percent today. The measure has slumped 9.1 percent in the past month and overseas investors yesterday sold 3.2 billion baht ($42 million) more Thai shares than they bought.

Virabongsa Ramangkura, a former finance minister, said yesterday the baht may breach 35 per dollar by the end of this year and slump to 40 in 2009. Without the support of the central bank it would probably have already weakened past 34, Usara Wilaipich, Bangkok-based senior economist at Standard Chartered Plc, said today on state-owned Thai PBS channel.

``The central bank has continued to intervene in the market to slow the baht's weakness,'' said Usara. ``Allowing the baht to fall too much is not good at this time as it will raise import costs and fan inflation.''

Crude oil's advance and the rising cost of rice helped drive Thailand's inflation rate to 8.9 percent in June, the highest since July 1998. Thailand imports almost all the oil it needs and crude prices touched a record $146.69 a barrel on July 3.

To contact the reporter for this story: Shanthy Nambiar in Bangkok at [email protected].

Last Updated: July 10, 2008 00:57 EDT

[cloudhopper]

I would have thought trying to prop up the Baht would be a waste of foreign currency reserves and ultimately futile anyway.

[ray23]

At one point they certainly were propping up the baht, if it is still going I dont know.

[Samuian]

I would have thought trying to prop up the Baht would be a waste of foreign currency reserves and ultimately futile anyway.

it's the way how they jump started the Asian financial crisis in 1997/8 - well done boys keep it comin' prop it up, keep propping it up, things will be soon back to normal!

Then the US$ was 50 ThB which I thought was it's buying value towards hard currencies. The Euro should be in the Range of 55-60 and things would be rollin' again!

Edited July 10, 2008 by Samuian

[britmaveric]

Odd, baht survived many of the disasters over the years when I was certain it would drop like a rock. Oh well enjoy everyone - lets hope it continues for the long term.

[lannarebirth]

Why would it be in anyones imterest to prop up the baht? Only thing I can think of is large baht holders trying to get their money out, but that's pretty hard to do. A weaker baht makes Thailand more competitive against it's asian neighbors.

[keestha]

Being financially dependent on tourism, I don't exactly loose sleep over the fact that the Baht has weakened to 52 to the Euro. It could at least partially offset the effects of flights having become more expensive, and prices having risen in Thailand. Also exporters probably still feel good at the moment.

On the other hand, inflation is spiralling out of control, and minimum wages don't rise much......which spells trouble. Imports are affected, and so on.

Who has a better idea of the bigger picture?

Edited July 10, 2008 by keestha

[ray23]

Well part of the answer is they want a strong baht to get more dollars for the purchase of oil.

Inflation is much higher then expected, not what that has to do with the baht I have no idea, but there is a lot of talk about it.

The BOT is supposed to look at interest rates this month, that could have an effect on the baht as well as inflation. The business people are opposing the move, because they see a fall in the growth. This is the thougth process that could cause a repeat of 97. Not good for Thailand but it would help my bank account. Unless they get really stupid there will be no crash.

It's intersted to watch the change on the news we are getting over the past few years with this. If was growing gang busters against the dollar as everything else was. The baht was a big gainer with a hedge fund involved. What we were hearing not that long ago, we have to stop the growth of the baht it's killing exports.

Just in a short period of time we are seeign the other thought process. The two positions are night and day.

The best would be if the mid ground is found, that could be very difficult to do is the world today.

[Gary A]

When the baht was very strong they worked to weaken it so exports would would be more competitive. When oil went crazy they worked to strengthen the baht so oil would be cheaper. You can't have it both ways. It is pretty much accepted that the baht should be at 35 to the dollar and it appears that's where it is heading.

[hashmodha]

When the baht was very strong they worked to weaken it so exports would would be more competitive. When oil went crazy they worked to strengthen the baht so oil would be cheaper. You can't have it both ways. It is pretty much accepted that the baht should be at 35 to the dollar and it appears that's where it is heading.

I agree with that!really is time Thailand focused on her own internal problems and not behave in the "Big Boys League"! we bought some land last year which cost us 15% more because of the "so called strong Baht against the UK pound!I spoke several times to the BOTs analyst who kept on misleading me by saying the markets are doing what the Baht was doing and it will correct itself!!Now it will time to see the real correction,will be!i aim to regain what i lost out and make a little more on top to pay a few extra bills,i have to say i am very pleased with the number of well informed,knowledgeable people around us,well done team,this is my first!

[wasabi]

When the Baht drops to 50:1 USD where it belongs I will finally be able to afford the Thailand Elite card I so much deserve. Then I'll really be livin La Vida LOS.

[NotNew2You]

Don't know how it all washes out but for expatriates in LOS, a weaker baht is a double-edged sword. Sure, you get a better exchange rate when bringing money over and therefore, your purchases denominated in baht are cheaper (real property, domestic wages, locally produced products and services) but as mentioned, imported products (oil, foodstuffs, electronics, IT equipment, etc.) become more expensive. My guess is it's basically a wash. Physiologically, however, I'd rather be getting B35-B40 to US$ than 30

[sotsira]

When the baht was very strong they worked to weaken it so exports would would be more competitive. When oil went crazy they worked to strengthen the baht so oil would be cheaper. You can't have it both ways. It is pretty much accepted that the baht should be at 35 to the dollar and it appears that's where it is heading.

I agree with that!really is time Thailand focused on her own internal problems and not behave in the "Big Boys League"! we bought some land last year which cost us 15% more because of the "so called strong Baht against the UK pound!I spoke several times to the BOTs analyst who kept on misleading me by saying the markets are doing what the Baht was doing and it will correct itself!!Now it will time to see the real correction,will be!i aim to regain what i lost out and make a little more on top to pay a few extra bills,i have to say i am very pleased with the number of well informed,knowledgeable people around us,well done team,this is my first!

Im afraid it's more the other way around it's the weaker pound not a stronger baht. The GBP has weakened globally over the last 7-8 months together with the USD, where the Euro has gained stronger.

The US & UK are heading for a recession due to the credit crunch and the UK have also reduced interest rates 3 times this last 6 months and at the same time fighting an inflation rise too.

[cloudhopper]

Im afraid it's more the other way around it's the weaker pound not a stronger baht. The GBP has weakened globally over the last 7-8 months together with the USD, where the Euro has gained stronger.

The US & UK are heading for a recession due to the credit crunch and the UK have also reduced interest rates 3 times this last 6 months and at the same time fighting an inflation rise too.

I wonder just how the UK is "fighting" inflation by lowering rates? Sounds to me like it's all talk and no action (in the US too).

On a slightly different note though I wonder why the Euro has been so strong with that whole economy in the doldrums as well....

[JimsKnight]

Hopefully by Xmas it'll the baht will be up to 70 to the pound, I'm happy to see it climb back from the 60 figure it was at a few months back though.