Why Is The Baht Still Strong?

[melbat]

With inflation rampant, consumer inflation over 9%, Tourism plummeting, The government in deep problems and demonstrations threatening to bring the country to a standstill why is the baht still strong against the Pound Sterling and Euro. I know there is problems in the UK and Eurozone but nothing to compare with the problems here. Where will the baht go next? Up or down????

[mouse]

Keep an eye on it......it is starting to move south...especially with problem going on in Bangkok

[lannarebirth]

Could be worse; much worse.

[glyph]

"With inflation rampant, consumer inflation over 9%, Tourism plummeting, The government in deep problems and demonstrations threatening to bring the country to a standstill why is the baht still strong against the Pound Sterling and Euro."

Because, compared to the rest of the world, things are still OK here.

[PhilHarries]

Curious, this thread running in parallel with another bemoaning the fact that the Baht is at a nine month low.

Strange people are economists. Currency is strong, it's a bad thing and the sky is falling. Currency is weak, it's a bad thing and the sky is falling. Economists are perpetual pessimists.

I don't know that the Baht is so much strong but that the dollar, in particular, is still weak. Against the GBP I believe the Baht has dropped significantly but I don't know about the Euro (got assetts in GBP and am paid in Dollars). The Baht has weakened recently but not to a significant degree. Whether it will continue to weaken will depend on how quickly the government can dig itself out of the mire it has got into.

I guess, if you are looking for a reason, the Baht's strength is a reflection of the world market's confidence in the currency. How long this confidence will last is anybody's guess but I wouldn't anticipate a major move either way in the near future.

There I've made a prediction, expect the Baht to plummet this afternoon.

[britmaveric]

Baht has lost a lot to $ expect 40-45 soon per $.

[Naam]

Baht has lost a lot to $ expect 40-45 soon per $.

latest by Christmas... but nobody knows which year

[melbat]

Baht has lost a lot to $ expect 40-45 soon per $.

The US $ has got stronger against most currencies in the past weeks.. especially against the Pound Sterling and Euro. It just amazes me why the baht has stayed strong against the pound and euro. Inflation in Thailand is much higher in the past months than in the Eurozone. I would have thought that this should have been reflected in the Thai Baht rate. As a previous reader stated it's all down to confidence and in the next months I expect too see a much weaker Thai baht.... but I have been wrong before. A few weeks ago pound baht rate went to 67 and I told a friend to hold fire about sending to money to Thailand as I expected the baht to weaken further.... he is still my friend...... only just!

[lannarebirth]

It is peoples conceit to think that if informed by enough information they can process that information to see why something is happening and what may happen in the future. Usually it's easier to see what's happening and act on what you see. I know it's really hard to push ones ego out of the way, but it's essential if one wants to see things as they are.

[LaoPo]

Because, compared to the rest of the world, things are still OK here.

Quote of the day in the

:D

LaoPo

[bernie66]

Baht has lost a lot to $ expect 40-45 soon per $.

I hope you are right.

[cloudhopper]

Besides using their foreign currency reserves to purchase Baht, they can keep the currency strong by raising rates - something the US is only talking about. How's that for role reversal?

Thailand Raises Rate for 2nd Time to Tame Inflation (Update2)

By Suttinee Yuvejwattana

Aug. 27 (Bloomberg) -- Thailand's central bank raised its benchmark interest rate for a second straight month to tame the fastest inflation in a decade.

The Bank of Thailand increased its one-day bond repurchase rate by a quarter point to 3.75 percent, the central bank said today in Bangkok. The decision was expected by 14 of 21 economists surveyed by Bloomberg. The others predicted no change.

Slowing growth and lower oil prices mean this may be the last time the central bank raises rates this year. Prime Minister Samak Sundaravej's government is putting pressure on Governor Tarisa Watanagase to keep borrowing costs on hold, amid concern higher rates will hurt Southeast Asia's second-largest economy.

``This will be the last increase,'' said Prakash Sakpal, an economist at ING Groep NV in Singapore. ``The economy is slowing. This will shift the central bank's policy focus from inflation to growth.''

Thailand's economic growth eased more than estimated in the second quarter as higher exports of rice and rubber failed to offset a decline in domestic spending. The $245 billion economy expanded 5.3 percent from a year earlier after gaining 6.1 percent in the first quarter.

The baht rose 0.6 percent to 34.03 per dollar as of 2:45 p.m. in Bangkok. The currency gained earlier today after Prime Minister Samak said police won't use force to break up protests calling for his resignation. The benchmark SET Index climbed 0.5 percent as of 2:47 p.m., little changed from the midday break.

Samak Under Fire

Thai police surrounded Samak's office today, laying siege to the almost 5,000 protesters demanding his resignation. Samak called their demands ``unreasonable'' and said police will be ``soft and gentle'' to the demonstrators.

``The central bank didn't discuss the political situation in the meeting today,'' Assistant Governor Duangmanee Vongpradhip told reporters in Bangkok. ``Political uncertainty, which has existed for quite some time, has already been factored in to our economic model unless there is major bloodshed.''

The higher rate would continue to support economic growth, Duangmanee said, adding that inflation remains the key risk because of uncertainties over oil prices.

``The rate hike will anchor inflation expectations,'' she said, helping ``reduce the possibility that the inflation rate will rise to double-digits.''

Inflation in Thailand accelerated to 9.2 percent last month, the fastest pace since 1998. Crude oil has tumbled 22 percent from a record $147.27 a barrel on July 11.

Oil Costs Ease

``A correction of oil prices appears to have alleviated the central bank's concerns on inflation,'' said Usara Wilaipich, an economist at Standard Chartered Plc in Bangkok. ``Inflation will peak in the third quarter and ease off in the fourth quarter given fuel tax cuts.''

Easing fuel costs and government measures to reduce pump prices and give free electricity and water to low-income families for six months will start to slow inflation from October, Finance Minister Surapong Suebwonglee said Aug. 15.

Thailand's central bank last month raised its key rate by a quarter point to 3.5 percent, the first increase in two years. The move has been criticized by members of the government.

At least half of the 14 economists in the Bloomberg News survey who predicted today's rate decision expect no further increases this year.

`Stand Straight'

Borrowing costs shouldn't be raised further as it would hurt consumers and companies, newly-appointed Deputy Finance Minister Suchart Thadathamrongvej said Aug. 25. Suchart early this month said Governor Tarisa should resign if the central bank's policy differs from the government's position.

Governor Tarisa on Aug. 21 vowed to ``stand straight'' and continue to act in ``the best interest of the country'' after King Bhumibol Adulyadej praised the Bank of Thailand for its handling of monetary policy and its concern with inflation.

Still, some economists said the central bank should keep increasing borrowing costs as the current policy stance remains stimulative and will fuel inflation. Adjusted for the pace of price increases, Thailand's real deposit rates stood at minus 6.6 percent and real lending rates were at minus 1.65 percent, the central bank said July 16.

``The current stance of monetary policy is accommodative,'' Cem Karacadag, an economist at Credit Suisse in Singapore, said before today's announcement. ``We see the Bank of Thailand hiking the one-day repo rate to 4.25 percent in the reminder of 2008 mainly to lift negative real interest rates.''

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at [email protected]

Last Updated: August 27, 2008 04:12 EDT

[Kadafi]

Last month i was in Thailand and it was 67 baht-pound and thought things were looking good, i'm back in the UK sorting some things out and now notice its slumped quickly to below 63 baht-pound.

Now i'm quite concerned as i was expecting to transfer 4-5 million baht next month and dreading the thought if it keeps falling...

[Naam]

Why Is The Baht Still Strong?

another interest hike by the BOT yesterday.

[Kadafi]

Why Is The Baht Still Strong?

another interest hike by the BOT yesterday.

Does this mean it will continue to rise against the pound? interest hike would be long term or short term results? as im planning to transfer money in around 4 weeks time, concerned it might continue to rise against the pound...

[Naam]

Why Is The Baht Still Strong?

another interest hike by the BOT yesterday.

Does this mean it will continue to rise against the pound? interest hike would be long term or short term results? as im planning to transfer money in around 4 weeks time, concerned it might continue to rise against the pound...

that's what is written in clever books, but it doesn't always turn out like this. based on expected rate cuts in UK and (most probably) another rate hike by the BOT the Baht should strengthen. but your guess is as good as mine.

[meom]

I think you’re missing the point Kadafi. People here always say that you shouldn’t send more money to Thailand than you are prepared to walk away from.

Keeping this in mind you’re basically prepared to kiss goodbye to 4-5 million so why the sudden concern about a few percent difference in the exchange rate?

[Naam]

I think you’re missing the point Kadafi. People here always say that you shouldn’t send more money to Thailand than you are prepared to walk away from.

Keeping this in mind you’re basically prepared to kiss goodbye to 4-5 million so why the sudden concern about a few percent difference in the exchange rate?

and i think you are missing Kadafi's point Meom. he didn't ask for advice what to do with his money but when to exchange it for Baht.

p.s. "people here" say always a lot without thinking and without considering individual cases. this forum provides quite often valuable advice in all respects. but if one would listen and follow everything what "people here" say then...

[sfokevin]

As "Independent" as the BOT states it is... I assume they are under orders to maintain the status quo at least in the short term... and they have a huge stash of US Treasury Bills to do just that...

Edited August 28, 2008 by sfokevin

[meom]

I think you’re missing the point Kadafi. People here always say that you shouldn’t send more money to Thailand than you are prepared to walk away from.

Keeping this in mind you’re basically prepared to kiss goodbye to 4-5 million so why the sudden concern about a few percent difference in the exchange rate?

and i think you are missing Kadafi's point Meom. he didn't ask for advice what to do with his money but when to exchange it for Baht.

p.s. "people here" say always a lot without thinking and without considering individual cases. this forum provides quite often valuable advice in all respects. but if one would listen and follow everything what "people here" say then...

You’re probably right Naam so I apologize to the OP in case he feels offended by my comment.

[Kadafi]

I think you’re missing the point Kadafi. People here always say that you shouldn’t send more money to Thailand than you are prepared to walk away from.

Keeping this in mind you’re basically prepared to kiss goodbye to 4-5 million so why the sudden concern about a few percent difference in the exchange rate?

Has any of what you have written got to do with the exchange rate? Replying to Why Is The Baht Still Strong? i think you are the one missing the point, if you are unable to post anything with regards to the topic..then best just say nothing at all...

[Naam]

Has any of what you have written got to do with the exchange rate? Replying to Why Is The Baht Still Strong? i think you are the one missing the point, if you are unable to post anything with regards to the topic..then best just say nothing at all...

can you read?

Why Is The Baht Still Strong?

(Naam @ 2008-08-28 01:19:40)

another interest hike by the BOT yesterday.

[ray23]

Interesting article or thought process. Increses the value of the baht yes, slows inflation yes. Boosts the economic growth lost me there.

"Thai central bank raises policy interest rate 25 basis points to 3.75%

BANGKOK, Aug 27 (TNA) -- In an attempt to spur the country's economic growth and control inflation, the Bank of Thailand (BoT) Monetary Policy Committee (MPC) on Wednesday raised its benchmark interest rate by 25

basis points to 3.75 per cent with immediate effect, according to a senior central bank official.

BoT assistant governor Duangmanee Vongpradhip said the MPC had agreed at its meeting to raise its policy interest rate, which is expected to help boost the country's economy.

The real interest rate at end-July this year remained contracted, said Ms Duangmanee, adding that deposit and lending interest rates contracted 4.8 and 2 per cent respectively.

The Thai economy during the second quarter this year grew at a slower place than the first quarter due to lower government spending and a high rate of inflation, she said.

However, declines in global oil prices and Thailand's continued impressive performance in the export area would help boost the national economy in future, Ms Duangmanee said.

However, the MPC cautioned that because of a possible volatility in world oil prices plus expected local high inflation in future, inflation would remain a significant factor which needs to be closely monitored, she said.

Wednesday's hike in the policy interest rate was made despite an earlier objection by Virabongsa Ramangkul, new chief economic advisor to the prime minister. (TNA)

Business News"

[chiang mai]

The Baht remains strong because:

1) BOT is intervening in the Forex market to keep the Baht at acceptable levels, and

2) BOT has increased it's base rate and is expected to do so again.

3) It nicely buggers up those who had planned to transfer funds this month - it's all a conspiracy you know!

[ray23]

Yep that is prety much the ABC's of it.

BOT said months ago it would manipulate the exchange rate to keep the baht strong and they did just that. The interest rate helped of course. But I'm willing to bet they spent a ton of money this week.

Maybe a better way to say that is they sold a lot of dollars into the system this week.

Edited August 28, 2008 by ray23

[lannarebirth]

I no longer have much interest in the THB:USD exchange. I think I've done about all I can do to balance my risks in this area. As someone that generates income in $USD and holds still more, I'm be using the $USD strength to spread the $USD risk out further into those currencies it is gaining on. Not doing anything yet at these exchange rates however.

[think_too_mut]

The Baht remains strong because:

1) BOT is intervening in the Forex market to keep the Baht at acceptable levels, and

2) BOT has increased it's base rate and is expected to do so again.

3) It nicely buggers up those who had planned to transfer funds this month - it's all a conspiracy you know!

I have been enjoying strong A$ for more than a year. Last tangible benefit was money transfer on July 9th. To pay 2.5 mil baht, it took 78K A$.

Today it would take almost 88K A$. That's 10K A$ difference.

For over a year the 20K B rent was 610A$. Just paid the last one 1 hour ago : 720$ + fee.

Edited August 29, 2008 by think_too_mut

[ray23]

"Thailand's Central Bank Says Instability Poses Risks (Update1)

By Suttinee Yuvejwattana and Shanthy Nambiar

Aug. 29 (Bloomberg) -- Thailand's central bank said political instability has overtaken inflation as the biggest threat to the economy, amid a standoff between police and 12,000 antigovernment protesters that has entered its fourth day.

``To me, I think it is political risk,'' Deputy Governor for Monetary Stability Atchana Waiquamdee, 57, said in an interview today in Bangkok. ``We have already faced the negative factors globally. We should refrain from having any unreasonable domestic factors that will hurt the economy even more.''

Thailand's economy slowed for the first time in more than a year in the second quarter as higher exports of rice and rubber failed to offset a decline in domestic spending. The central bank expects growth to ease further in the second half as protests against Prime Minister Samak Sundaravej's six-month-old government erode consumer confidence and keep investors away.

Members of the People's Alliance for Democracy stormed Samak's office on Aug. 26, claiming his government was illegitimate because it served the interests of former premier Thaksin Shinawatra, ousted in a 2006 coup. Samak pledged this week a ``soft and gentle'' response to the protest, amid concern an outbreak of violence could raise the specter of another coup.

Central Bank Governor Tarisa Watanagase is under pressure from the government to keep borrowing costs on hold to spur growth. Still, policy makers raised rates for a second time this year on Aug. 27, joining the Philippines, Indonesia and India in choosing to tackle inflation at the expense of economic growth.

``Politics is our key concern,'' said Pongtharin Sapayanon, who helps oversee $619 million at Aberdeen Asset Management in Bangkok. ``If the central bank thinks politics is the major risk, it means they will focus more on growth. This reduces the possibility they will raise rates further.''

Balancing Act

Thai policy makers aren't ruling out more interest rate increases, as the central bank looks for ways to slow inflation, Atchana said. While consumer prices may have peaked, because of lower oil prices and fuel taxes, the central bank still needs to ``anchor'' inflation expectations, she said.

``We aren't sure whether crude oil prices will reach above $130 to $140 a barrel,'' said Atchana, who has worked at the Bank of Thailand for a decade and holds a doctorate degree in economics from the University of Michigan. ``We are not sure about inflation dynamics, and that hiking rates by 50 basis points will be able to anchor inflation expectations.''

Policy makers this week raised the one-day bond repurchase rate to 3.75 percent for a second straight month, saying the level was adequate to temper inflation and still support economic growth.

Inflation Outlook

Inflation accelerated to 9.2 percent last month, the fastest pace since 1998. Crude oil has tumbled 22 percent from a record $147.27 a barrel on July 11.

``The inflation rate won't reach double-digits,'' Atchana said. ``Lowering interest rates can't be ruled out, but it shouldn't be so soon.''

Growing street protests in Bangkok sent the baht and stocks tumbling this week. The baht touched an 11-month low on Aug. 26, while the benchmark SET Index dropped 1 percent this week. Attempts to remove Samak and ban his ruling party prompted global funds to pull $323 million from the stock market this month.

``We want to contain volatility in the baht,'' Atchana said, when asked about efforts to stem baht weakness. ``We like to keep an eye on the nominal effective exchange rate to ensure the baht is not under- or-overshooting other currencies. Even if you would like to see the baht appreciate to reduce the inflationary pressure, you can't work against the market.''

International reserves fell to $101.7 billion last week from $106.4 billion in the week ended July 18. The fall in reserves suggests the central bank has ``been buying baht and selling dollars,'' and ``in the last couple of weeks, stepped it up to $1 billion,'' a week, Supavud Saicheua, head of research at Phatra Securities Pcl in Bangkok, said on Aug. 26.

Growth Dynamics

Thailand's $245 billion economy expanded 5.3 percent in the second quarter, slowing from 6.1 percent in the first three months of the year. Finance Minister Surapong Suebwonglee has announced economic-stimulus packages, including tax cuts and free electricity and water to low-income families, to help boost growth to 6 percent this year from 4.8 percent in 2007.

Samak became prime minister in January, promising to spend about $50 billion in the next four years on infrastructure projects to revive growth and confidence.

The central bank may revise its 2008 economic growth forecast after the October interest rate meeting, Atchana said. The National Economic & Social Development Board on Aug. 25 raised its forecast for growth to between 5.2 percent and 5.7 percent, while the Bank of Thailand forecasts growth of between 4.8 percent and 5.8 percent.

``The upward revision by the board is in line with our forecast because of lower oil prices, and a better than expected global economy and Thai exports,'' Atchana said.

Thailand's Election Commission will announce Sept. 2 whether it will seek the dissolution of Samak's People Power Party, formed by supporters of Thaksin, for vote-buying in December elections.

To contact the reporter on this story: Shanthy Nambiar in Bangkok at [email protected]; Suttinee Yuvejwattana in Bangkok at [email protected]. "

[ericjt]

Let's consider that the Baht is not a major currency. It is a restricted currency and not even traded by many (most?) foreign exchange dealers. Many major currencies offer much higher interest rates and are backed by much larger and stronger economies which are runnning lower inflation rates than Thailand. So the real rate of return from, say holding New Zealand Dollars and collecting 7+% interest would appear to be higher than holding the Thai Baht and collecting around 3% interest.

So why is the Thai Baht strong? If there are any underlying economic fundamentals, this writer sure can't see them. So that leaves:

1. The BOT, possibly in conjunction with a friendly US government/Federal Reserve intervening to prop up the Baht, and,

2. Perhaps the Baht has been the target of a group of hedge funds and other aggressive equity-type investors buying relatively large amounts of a currency which is traded in a restricted and thin market and therefore guaranteeing themselves a profitable investment. What do they call it? A self fulfilling prophecy? Or something like that, and,

3. Maybe the Baht is being used by investment funds as a proxy for Chinese Yuan or RMB which they can't buy. This sound pretty weak to me, but my currency guy suggested it.

He also suggests buying the USDTHB pair. (The THB will fall in value which means that the USDTHB pair will rise in value -- from 33+ now to 40+ soon.) Like one of the other participants in this thread, my guy expects the USDTHB pair to reach the 40-42 range within the next 6-12 months. That means $1USD will buy as much as 42 THB. So you go long the pair if you think the Baht will weaken compared to the USD.

If anybody else has any other explanations, I'd sure like to read them.

[lannarebirth]

Why Is The Baht Still Strong?

another interest hike by the BOT yesterday.

Does this mean it will continue to rise against the pound? interest hike would be long term or short term results? as im planning to transfer money in around 4 weeks time, concerned it might continue to rise against the pound...

You can talk about pounds and baht if you want, but it's all about the $USD. Next stop for the GBP is $USD 1.75. You can discern for yourself what that may mean for your GPB:THB exchange.