Bad News For Sterling

[chiang mai]

For the first time since the current economic crisis started I am becoming nervous about the short and medium term future of GBP Sterling, not simply because the rate is fluctuating but because of the slightly larger picture - here's some points to consider for those of us who rely on the investment return from our Pounds:

Over the past year the Thai Baht has been the second worst performer of all currencies in the region yet Sterling has managed to achieve a half way respectable rate of as high as 67 Baht to the Pound - the Pound is however now in decline against the US Dollar and as a consequence, against Thai Baht. The prognosis for Thai Baht is that its performance can only improve, not worsen.

UK interest rates are widely expected to fall beginning in 2009 as the BOE begins to switch its major focus from fighting inflation to stimulating growth and rates are likely to be around 4.50% by mid 2009 - clearly if the economy in the UK does not respond well the rate may push lower. The yield on GBP will therefore fall further and this will also worsen the Pound to Baht exchange rate, a double whammy if you like.

In the meantime of course, USD is beginning to strengthen and many observers reckon the "bounce" has begun and I agree.

Given the above I wonder how many Brits have actively taken steps to mitigate their loss and exchanged Pounds for, dare I say it, Baht or US Dollars to cover their spending needs of the say the next two to three years? I reckon those that have/do not taken such steps could easily see their earnings halved over the next twelve months. Too difficult to do, don't know how, not sure if it's the right thing to do? One simple solution rests with Nationwide International in the IOM where a USD Tracker account can be opened - it pays 2.50% and their conversion rate from Pounds to USD involves only a small margin. For everyday folks who are not into the complexities of financial markets it's one easy solution, perhaps others have different alternatives?

Edited August 5, 2008 by chiang mai

[Mattchu9999]

Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar when converting into Thai Bhat.

If current trends continue Im sorry but as a Yank I'm a bit optimistic about the future of the USD/BHT exchange rate.

[Marvo]

One simple solution rests with Nationwide International in the IOM where a USD Tracker account can be opened - it pays 2.50% and their conversion rate from Pounds to USD involves only a small margin. For everyday folks who are not into the complexities of financial markets it's one easy solution, perhaps others have different alternatives?

Hi Chiang Mai, How about moving Stirling into Euro? What's your take on the $ Vs € outlook? I don't know what easy investment options there are though re euro accounts for UK citizens.

[Naam]

Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar when converting into Thai Bhat.

that calls for an explanation.

[haybilly]

For the first time since the current economic crisis started I am becoming nervous about the short and medium term future of GBP Sterling, not simply because the rate is fluctuating but because of the slightly larger picture - here's some points to consider for those of us who rely on the investment return from our Pounds:

Over the past year the Thai Baht has been the second worst performer of all currencies in the region yet Sterling has managed to achieve a half way respectable rate of as high as 67 Baht to the Pound - the Pound is however now in decline against the US Dollar and as a consequence, against Thai Baht. The prognosis for Thai Baht is that its performance can only improve, not worsen.

UK interest rates are widely expected to fall beginning in 2009 as the BOE begins to switch its major focus from fighting inflation to stimulating growth and rates are likely to be around 4.50% by mid 2009 - clearly if the economy in the UK does not respond well the rate may push lower. The yield on GBP will therefore fall further and this will also worsen the Pound to Baht exchange rate, a double whammy if you like.

In the meantime of course, USD is beginning to strengthen and many observers reckon the "bounce" has begun and I agree.

Given the above I wonder how many Brits have actively taken steps to mitigate their loss and exchanged Pounds for, dare I say it, Baht or US Dollars to cover their spending needs of the say the next two to three years? I reckon those that have/do not taken such steps could easily see their earnings halved over the next twelve months. Too difficult to do, don't know how, not sure if it's the right thing to do? One simple solution rests with Nationwide International in the IOM where a USD Tracker account can be opened - it pays 2.50% and their conversion rate from Pounds to USD involves only a small margin. For everyday folks who are not into the complexities of financial markets it's one easy solution, perhaps others have different alternatives?

What exactly does one do--Duhh??? OK--open the account, specify amount to invest and transfer in from another account and then what?? Sorry to ask what are probably dumb questions. They make the conversion at the rate you mention when one transfers sterling in, I take it--and is that it? This account can be opened from abroad, providing one has a UK, or Thai, address?

[Mattchu9999]

Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar when converting into Thai Bhat.

that calls for an explanation.

Aug 4th 1 USD = 33.6 BHT

Aug 4th 1 GBP = 65.8 BHT

Im sorry your right, Its not double, only .0234 away from being double.

Heghlu'meH QaQ jajvam!

[haybilly]

Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar when converting into Thai Bhat.

that calls for an explanation.

Aug 4th 1 USD = 33.6 BHT

Aug 4th 1 GBP = 65.8 BHT

Im sorry your right, Its not double, only .0234 away from being double.

Heghlu'meH QaQ jajvam!

That's because the exchange rate of $US to Sterling was dam_n nearly 2:1--makes sense, eh???

[Mattchu9999]

Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar when converting into Thai Bhat.

that calls for an explanation.

Aug 4th 1 USD = 33.6 BHT

Aug 4th 1 GBP = 65.8 BHT

Im sorry your right, Its not double, only .0234 away from being double.

Heghlu'meH QaQ jajvam!

That's because the exchange rate of $US to Sterling was dam_n nearly 2:1--makes sense, eh???

Yeah it does as I'd love to find a currency conversion backdoor to the Bhat that gets me a higher rate but I think I'd have better luck finding WMD in Iraq. And I was there and looked myself...lol

[lannarebirth]

You know, major currency bottoms take years to play out. Even if the $USD has hit a price low, which is uncertain at this point in time, it has a lot, and I mean tons, of overhead resistance it needs to trade through. That will probably occur by moving largely sideways.

Here's the past, which may offer a possible roadmap:

Here's one cycle view:

Here's the ST view of the $USD Index:

as you can see it's overbought and at resistance (which it's breaking in overnight session) , on a day the US Fed meets. Perfect trap for longs and shorts. Plenty of time to make a decision later IMO

Here's an Intermediate Term GBP chart in what's known as an "expanding triangle" price pattern:

It's generally considered to be a bearish pattern, but due to it's shape, new highs even, can not be precluded:

http://www.eyield.co.uk/myarea/introductio...ng_triangle.htm

These are really hard decisions to make, and one I struggled with myself, as I watched the $USD plunge and only partialy mitigated the damage it did to my own networth. I think a basket of currencies is probably the best approach, but which currencies those should be must be left to individual choices. Good Luck.

[chiang mai]

For the first time since the current economic crisis started I am becoming nervous about the short and medium term future of GBP Sterling, not simply because the rate is fluctuating but because of the slightly larger picture - here's some points to consider for those of us who rely on the investment return from our Pounds:

Over the past year the Thai Baht has been the second worst performer of all currencies in the region yet Sterling has managed to achieve a half way respectable rate of as high as 67 Baht to the Pound - the Pound is however now in decline against the US Dollar and as a consequence, against Thai Baht. The prognosis for Thai Baht is that its performance can only improve, not worsen.

UK interest rates are widely expected to fall beginning in 2009 as the BOE begins to switch its major focus from fighting inflation to stimulating growth and rates are likely to be around 4.50% by mid 2009 - clearly if the economy in the UK does not respond well the rate may push lower. The yield on GBP will therefore fall further and this will also worsen the Pound to Baht exchange rate, a double whammy if you like.

In the meantime of course, USD is beginning to strengthen and many observers reckon the "bounce" has begun and I agree.

Given the above I wonder how many Brits have actively taken steps to mitigate their loss and exchanged Pounds for, dare I say it, Baht or US Dollars to cover their spending needs of the say the next two to three years? I reckon those that have/do not taken such steps could easily see their earnings halved over the next twelve months. Too difficult to do, don't know how, not sure if it's the right thing to do? One simple solution rests with Nationwide International in the IOM where a USD Tracker account can be opened - it pays 2.50% and their conversion rate from Pounds to USD involves only a small margin. For everyday folks who are not into the complexities of financial markets it's one easy solution, perhaps others have different alternatives?

What exactly does one do--Duhh??? OK--open the account, specify amount to invest and transfer in from another account and then what?? Sorry to ask what are probably dumb questions. They make the conversion at the rate you mention when one transfers sterling in, I take it--and is that it? This account can be opened from abroad, providing one has a UK, or Thai, address?

Correct on all points. Best to have the funds available to Nationwide on the same day you agree the rate of exchange with them (amounts under £20k whatever the going rate is at the time, larger amounts allow you to negotiate a slightly better rate.) Account can be operated over the net if required.

[chiang mai]

One simple solution rests with Nationwide International in the IOM where a USD Tracker account can be opened - it pays 2.50% and their conversion rate from Pounds to USD involves only a small margin. For everyday folks who are not into the complexities of financial markets it's one easy solution, perhaps others have different alternatives?

Hi Chiang Mai, How about moving Stirling into Euro? What's your take on the $ Vs € outlook? I don't know what easy investment options there are though re euro accounts for UK citizens.

My personal view is that the Euro has peaked hence there is not much more to be made from it but others may well see things differently.

[AFKAFSinLOS]

For a Brit living in Thailand, I'd put one third of my money in THB (in case you stay in Thailand), one third in GBP (in case you go back), and the rest in a mixture of currencies, which you can tweak for whatever is your own "cup of tea"... .

Then just sit back and enjoy life...until someone finds the cat that stole Naam's crystal ball, and said person lets us all know what's best...

Edited August 5, 2008 by AFKAFSinLOS

[lannarebirth]

If it's any consolation, if I were to create a "ThaiVisa" indicator", I find most of the noise and anguish tends to come around short cycle bottoms/tops. Good luck

[Naam]

For a Brit living in Thailand, I'd put one third of my money in THB (in case you stay in Thailand), one third in GBP (in case you go back), and the rest in a mixture of currencies, which you can tweak for whatever is your own "cup of tea"... .

Then just sit back and enjoy life...until someone finds the cat that stole Naam's crystal ball, and said person lets us all know what's best...

it was the dog. the bad news is he refuses to confess as well as to repent but the good news is that TV has a wealth of prophets who seem to deal in currency forecasts only

[Naam]

Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar when converting into Thai Bhat.

that calls for an explanation.

Aug 4th 1 USD = 33.6 BHT

Aug 4th 1 GBP = 65.8 BHT

Im sorry your right, Its not double, only .0234 away from being double.

Heghlu'meH QaQ jajvam!

That's because the exchange rate of $US to Sterling was dam_n nearly 2:1--makes sense, eh???

it does not make sense at all to post

quote: "Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar..."

an equivalent complaint would be "it's a tough pill to swallow that my neighbour gets 1 million if he sells his Accord and i'm getting only 500k when i sell my Jazz..."

oh well...

[Bangyai]

I tend to agree with Lannarebirth. I reckon that even if the dollar IS on the bounce its not going to rocket upwards too fast. A little sideways movement and then a slow climb. I have my nestegg in the Nationwide riding on a 1 year bond giving me 6.8 % tax free per annum so 2.5% sounds a bit grim.

[chiang mai]

Some good inputs from Lannarbirth as usual, thanks. In my untrained world of currency trading I have some very simple basic rules which say if GBP/USD is anywhere near 2.0, buy heavily and if GBP/USD hits 1.60, sell heavily. Since I followed these rules when GBP/USD hit 2.09 I personally am happy at present. But when I think about the combination of events that will likely take place next year and I modeled the impact of those things on my personal finances I realized that many British expats may have been lulled into a false sense of security recently because GBP/THB had maintained around 67'ish. This thread therefore serves its purpose if at least some folks take some form of hedging action before it is too late. Not easy? For sure it's not.

[chiang mai]

I tend to agree with Lannarebirth. I reckon that even if the dollar IS on the bounce its not going to rocket upwards too fast. A little sideways movement and then a slow climb. I have my nestegg in the Nationwide riding on a 1 year bond giving me 6.8 % tax free per annum so 2.5% sounds a bit grim.

Yes I know the feeling - if it helps any I also have some fairly substantial GBP deposits with NWI. But that really is the point of all of this - it's no good getting 6.8% on your home currency when the value of that currency falls by say 5%. The problem is then compounded as later the value of Thai Baht strengthens against an already weak Pound. As others will preach (quite correctly) we should really hedge our investments against a range of currencies but as others have also pointed out, that is nightmarishly difficult to do at present. In the absence of the latter, hedging with a separate single currency has to be the minimum sensible thing to do.

[Naam]

Some good inputs from Lannarbirth as usual, thanks. In my untrained world of currency trading I have some very simple basic rules which say if GBP/USD is anywhere near 2.0, buy heavily and if GBP/USD hits 1.60, sell heavily.

the trading periods you set seem a bit long to me CM. last time i saw GBP/USD at 1.60 was five years ago. am i right that you also trade in/out when the difference is less?

[chiang mai]

Some good inputs from Lannarbirth as usual, thanks. In my untrained world of currency trading I have some very simple basic rules which say if GBP/USD is anywhere near 2.0, buy heavily and if GBP/USD hits 1.60, sell heavily.

the trading periods you set seem a bit long to me CM. last time i saw GBP/USD at 1.60 was five years ago. am i right that you also trade in/out when the difference is less?

I only "trade" when I see what I believe to be an obvious opportunity to make some money or when I am forced to do so by virtue of circumstances - I am highly risk averse. I was fortunate that GBP/USD at 2.08 popped up long before I needed to hedge to protect my cash flow hence I now have the best of both worlds. Would I trade under 1.60? I would probably trade the extremes or safe bets, so if I saw 1.30 or thereabouts I would probably have a flutter. 1.40 to 1.80 is a very grey area for me and I have no training in this field.

[lannarebirth]

Fed leaves funds rate unchanged at 2 percent

"The Fed is really locked in right now. They can't go forward or backward," said Sung Won Sohn, an economics professor at the Smith School of Business at California State University Channel Islands.

[Mattchu9999]

Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar when converting into Thai Bhat.

that calls for an explanation.

Aug 4th 1 USD = 33.6 BHT

Aug 4th 1 GBP = 65.8 BHT

Im sorry your right, Its not double, only .0234 away from being double.

Heghlu'meH QaQ jajvam!

That's because the exchange rate of $US to Sterling was dam_n nearly 2:1--makes sense, eh???

it does not make sense at all to post

quote: "Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar..."

an equivalent complaint would be "it's a tough pill to swallow that my neighbour gets 1 million if he sells his Accord and i'm getting only 500k when i sell my Jazz..."

oh well...

Ill explain:

Using date from this economics website comparing US average income to British average income:

http://www.visualizingeconomics.com/2007/1...wth-since-1500/

It gives an annual figure of $20,159 for Britts and $28,403 for Yanks.

Notwithstanding inflation and other factors the actual gap increases and or decreases only minutley over many years time, so if the figures I gave above arent entirely current to this exact date, the important figure is the general average income differences between the two countrys.

With that being said, should my British counterpart wish to travel to LOS and take 1 months salry for spending there at the current conversion rate he would convert $1679 GBP into 110,414.502 THB

For us Yanks, we would convert $2366 USD into 79,556.750 THB.

Thats a difference of 30,857.752 BHT.....for a guy having a comparable job in Brittan, and we both earn the respective average wage.

I dont know about you, but 30K BHT is quite a few flip flops and Noodle dinners in LOS.

Quite a pill to swallow.

Your example assumption about selling cars is comparing appels to oranges in the same country. Im comparing apples to apples in different countrys.

If I had some crayons I'd draw it out for you...

P.S. please excuse my spelling errors...spell check for some reason isnt working for me... !!!

Edited August 6, 2008 by Mattchu9999

[Naam]

Ill explain:

Using date from this economics website comparing US average income to British average income:

If I had some crayons I'd draw it out for you...

no need to draw anything out for me Mattchu9999. average incomes are completely irrelevant and deceiving for "real" comparisons. what would you say if i tell you that the average income of the persons living in my house is higher than 50,000 dollars per year? that statement is correct! but if you ask our house maid or her husband the gardener/handyman what do you expect they'll tell you?

[Mattchu9999]

Ill explain:

Using date from this economics website comparing US average income to British average income:

If I had some crayons I'd draw it out for you...

no need to draw anything out for me Mattchu9999. average incomes are completely irrelevant and deceiving for "real" comparisons. what would you say if i tell you that the average income of the persons living in my house is higher than 50,000 dollars per year? that statement is correct! but if you ask our house maid or her husband the gardener/handyman what do you expect they'll tell you?

LOL WHAT?

Are you serious? Your not comprehending what I am writing.

Im not concerned with the SPECIFIC average income of one profession to another. Rather I am comparing similar average incomes as they differ between Brittan and the US and applying those averages to what their conversion rate is into Bhat.

I am correct in my asertation that even accounting for the differences in "average" or "median" wage earned between the two countries a person earning a "median" average wage in Brittan while statistically less that the US, if two "median" wage earners from each country go on vacation in Tahiland, the simple FACT is, the Britt will get a more favorable exchange rate than the American while they may hold similar poritions in the workforce in their respective countries.

[chiang mai]

Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar when converting into Thai Bhat.

that calls for an explanation.

Aug 4th 1 USD = 33.6 BHT

Aug 4th 1 GBP = 65.8 BHT

Im sorry your right, Its not double, only .0234 away from being double.

Heghlu'meH QaQ jajvam!

That's because the exchange rate of $US to Sterling was dam_n nearly 2:1--makes sense, eh???

it does not make sense at all to post

quote: "Well its been a tough pill to swallow watching Brits get almost double what us Yanks get for our dollar..."

an equivalent complaint would be "it's a tough pill to swallow that my neighbour gets 1 million if he sells his Accord and i'm getting only 500k when i sell my Jazz..."

oh well...

Ill explain:

Using date from this economics website comparing US average income to British average income:

http://www.visualizingeconomics.com/2007/1...wth-since-1500/

It gives an annual figure of $20,159 for Britts and $28,403 for Yanks.

Notwithstanding inflation and other factors the actual gap increases and or decreases only minutley over many years time, so if the figures I gave above arent entirely current to this exact date, the important figure is the general average income differences between the two countrys.

With that being said, should my British counterpart wish to travel to LOS and take 1 months salry for spending there at the current conversion rate he would convert $1679 GBP into 110,414.502 THB

For us Yanks, we would convert $2366 USD into 79,556.750 THB.

Thats a difference of 30,857.752 BHT.....for a guy having a comparable job in Brittan, and we both earn the respective average wage.

I dont know about you, but 30K BHT is quite a few flip flops and Noodle dinners in LOS.

Quite a pill to swallow.

Your example assumption about selling cars is comparing appels to oranges in the same country. Im comparing apples to apples in different countrys.

If I had some crayons I'd draw it out for you...

P.S. please excuse my spelling errors...spell check for some reason isnt working for me... !!!

Naam has already made the point so I will merely reinforce it, average earnings mean nothing in this context - better perhaps to look at the Big Mac Index to get a fairer appraisal of the comparison, seriously.

[Naam]

the simple FACT is, the Britt will get a more favorable exchange rate than the American while they may hold similar poritions in the workforce in their respective countries.

you win!

[chiang mai]

Ill explain:

Using date from this economics website comparing US average income to British average income:

If I had some crayons I'd draw it out for you...

no need to draw anything out for me Mattchu9999. average incomes are completely irrelevant and deceiving for "real" comparisons. what would you say if i tell you that the average income of the persons living in my house is higher than 50,000 dollars per year? that statement is correct! but if you ask our house maid or her husband the gardener/handyman what do you expect they'll tell you?

LOL WHAT?

Are you serious? Your not comprehending what I am writing.

Im not concerned with the SPECIFIC average income of one profession to another. Rather I am comparing similar average incomes as they differ between Brittan and the US and applying those averages to what their conversion rate is into Bhat.

I am correct in my asertation that even accounting for the differences in "average" or "median" wage earned between the two countries a person earning a "median" average wage in Brittan while statistically less that the US, if two "median" wage earners from each country go on vacation in Tahiland, the simple FACT is, the Britt will get a more favorable exchange rate than the American while they may hold similar poritions in the workforce in their respective countries.

On the basis of what you have written, are you also upset that your 100 USD only buys you around £51 whilst my 100 GBP buys me a whopping $195?

[lannarebirth]

I think the financial media has done a good job of conditioning people in certain behaviors, as in "always be in the market", "dollar cost average", "get on the property ladder", when the fact is there are good times to be in some things and bad times too. I think when one is only conditioned to buy it's hard to evaluate if a turn has occured. I found a useful tool for me, is to flip the whole thing upside down.

Would you buy this chart? If you wouldn't it's a buy, if you would it's a sell. I hold no opinion personally.

[lannarebirth]

So, the GBP is currently trading in the upper half of it's range against the THB this year. The USD is currently trading thr highest it has against the THB in 1.5 years. The GBP is currently trading at the lowest it has against the USD in almost 2 years. It's generally understood that the GBP:THB trade is more easily viewd as a GBP:USD:THB trade.

I submit, at least one of the three conditions I described is about to change.

[Murgatroyd]

On Friday 8/08/08, the GBP was fetching almost 67 Baht...

Within two trading days, it's dropped back to 64.2, and still falling... (12/08/08).

I wouldn't be transferring any large sums until it's risen again...