Why Is The Baht Still Strong?

[Kadafi]

There are so many things going on now that it would defy all logic for it keep it's strength.

Having said that I have said it so many times in the past that I really have no idea.

Persoanlly I don't see the problems to be short term problems. Will there be a time that it will be more prudent for the BOT to hold the funds for the future when harder times will come. I don't know

I would have thought, seeing as the sterling is in such bad shape and most the world having a financial struggle might aswell let the baht drop now rather than holding out and having the crisis when other currencies are recovering? though i guess it's the dollar the baht doesnt want to loose too much ground on...

[Naam]

The Central Bank continue to step in when they notice a sharp fall in the baht currency, can they continue to do this or will eventually the real cracks will appear and the baht will fall at a sharper rate...?

the foreign currency reserves of $ 103 billion (status june 2008) are bloody high for an economically relatively insignificant country like Thailand. in other words the BOT has enough cash to intervene in the markets for quite some time to come.

[LaoPo]

The Central Bank continue to step in when they notice a sharp fall in the baht currency, can they continue to do this or will eventually the real cracks will appear and the baht will fall at a sharper rate...?

the foreign currency reserves of $ 103 billion (status june 2008) are bloody high for an economically relatively insignificant country like Thailand. in other words the BOT has enough cash to intervene in the markets for quite some time to come.

Indeed...but it's a bluddy waste to intervene with such valuable money.....it's easier spent than made, especially these fine days Thailand is going thru

Those $ 100+ Billions are needed for bad times and those days are here now already.

``People simply have to understand Thailand is essentially a political mess,'' investor Marc Faber, who forecast the so-called Black Monday crash in 1987, said in an interview with Bloomberg Television from Bangkok. ``The economy is not very dynamic and it will continue to kind of move ahead slowly. These people looking for a strong stock market, I think that will be misplaced.''

Protests escalated in the past week, raising concerns that parliament may be dissolved, paralyzing government policies for boosting economic growth. Finance Minister Surapong Suebwonglee said last week growth may ease to 5.5 percent in the second half of the year because of a slowdown in exports. The economy grew 5.7 percent in the first half, a state agency said Aug. 25.

The benchmark SET Index fell 2.3 percent to 659.51 at the close today, the lowest since Feb. 1, 2007. It was the steepest decline since July 16. The baht fell 0.5 percent to 34.50 against the dollar in Bangkok, according to data compiled by Bloomberg.

`Not Helping'

``This is not helping the Thai baht,'' said Thomas Harr, a senior currency strategist at Standard Chartered Plc in Singapore. ``We are short the Thai baht. Dissolution of the Thai parliament is the most likely scenario.''

The central bank has ``intervened'' to support the baht, Deputy Governor Atchana Waiquamdee said in Bangkok today. ``We took care of the currency this morning because it fell a lot,'' she said. ``We need to curb the volatility.''

The events of the ``past two weeks have raised the probability of a negative action on the sovereign credit ratings,'' of Thailand, Standard & Poor's credit analyst Kim Eng Tan said in report today. The debt is rated BBB+, the eighth highest investment rating, with a stable outlook.

``Economic growth could fall markedly as domestic demand weakens further,'' S&P said. ``Inbound tourism and foreign direct investment would also decline. Even as revenue is expected to fall in this scenario, pressures for spending will increase.''

Overseas investors sold $3.1 billion more Thai stocks than they bought this year, according to data compiled by Bloomberg.

From: http://www.bloomberg.com/apps/news?pid=new...id=avmnhyUdrNuc

LaoPo

[Kadafi]

The Central Bank continue to step in when they notice a sharp fall in the baht currency, can they continue to do this or will eventually the real cracks will appear and the baht will fall at a sharper rate...?

the foreign currency reserves of $ 103 billion (status june 2008) are bloody high for an economically relatively insignificant country like Thailand. in other words the BOT has enough cash to intervene in the markets for quite some time to come.

That is one high reserve, i might sound stupid here but i guess the UK has foreign reserve aswell. Why can't the BOE do something similar to try and support the sterling freefall? I guess the scale of the UK problem is on a much higher scale and could not be controlled in this way or pointless in the long run...

Edited September 2, 2008 by Kadafi

[cloudhopper]

The Central Bank continue to step in when they notice a sharp fall in the baht currency, can they continue to do this or will eventually the real cracks will appear and the baht will fall at a sharper rate...?

the foreign currency reserves of $ 103 billion (status june 2008) are bloody high for an economically relatively insignificant country like Thailand. in other words the BOT has enough cash to intervene in the markets for quite some time to come.

That is one high reserve, i might sound stupid here but i guess the UK has foreign reserve aswell. Why can't the BOE do something similar to try and support the sterling freefall? I guess the scale of the UK problem is on a much higher scale and could not be controlled in this way or pointless in the long run...

Historically the foreign currency reserves of just about any country seem to have been inadequate to protect their currency versus the huge amounts flowing through the exchange markets.

[ray23]

I think they target the dollar as that is he currency oil is bought in. Seem to me easier to just use the dollar and buy the oil.

But the other side of the coin maybe they see what they are doing as a hedge on inflation. Don't know not that sharp.

One thing for any bank account over used will eventually be empty.

[xbusman]

I have a few questions perhaps the more learned members might know.

When we talk foreign reserves, who exactly owns the foreign reserves. Is this excess government money laying about? I always sort of thought it was private money (business) that is on deposit from a surplus of trading. When exports exceed imports.

My understanding is that the trading done by the BOT is done with the reserve currency on deposit from commercial banks, the BOT does not in fact "own" this money. I have also read on occasion that the losses in that trading have been stunning as they generally bet against the market, and that there is a real question as to who is going to pay for those losses. In fact, various sources have mentioned that the losses from 1997 from the central bank intervention have yet to be fully retired, only the IMF part has been paid back.

Regards volatility, I look over the currency charts every day and see the baht making a steady and gradual increase day by day. This is broken by huge spikes of someone selling baht at far below market price. I assume those are sales by the BOT which in addition to being major money losers, create the only real "volatility" in the pretty tame trading.

Being that there are so few real traders of Thai baht, and knowing a bit about Thailand and how it works here, I have to ask myself the question of "why" the BOT wants to actually increase volatility and make continuous massive losses by betting against the market. Who might be buying these baht at tremendous discounts and making many millions with each trade?

I think I read once where the BOT went through somewhere around 40 billion in reserves in 97 within less than four weeks. While 109 billions is impressive, I am still not sure who owns that money and why the BOT would be so interested in losing it.

[Naam]

The Central Bank continue to step in when they notice a sharp fall in the baht currency, can they continue to do this or will eventually the real cracks will appear and the baht will fall at a sharper rate...?

the foreign currency reserves of $ 103 billion (status june 2008) are bloody high for an economically relatively insignificant country like Thailand. in other words the BOT has enough cash to intervene in the markets for quite some time to come.

That is one high reserve, i might sound stupid here but i guess the UK has foreign reserve aswell. Why can't the BOE do something similar to try and support the sterling freefall? I guess the scale of the UK problem is on a much higher scale and could not be controlled in this way or pointless in the long run...

compared to the BOE and GPB the BOT is dealing with a tiny amount of currency trades in Thai Baht and the question is whether the BOE wants to have a stronger Pound.

comparison:

BOE total reserves valued 133 billion Dollars - U.K. GDP = 2.77 trillion Dollars

BOT total reserves valued 103 billion Dollars - Thailand GDP = 246 billion Dollars

in relation to GDP Thailand has 11 (ELEVEN) times the reserves of U.K.

[Naam]

My understanding is that the trading done by the BOT is done with the reserve currency on deposit from commercial banks, the BOT does not in fact "own" this money.

sorry, but your understanding is wrong.

[Naam]

The Central Bank continue to step in when they notice a sharp fall in the baht currency, can they continue to do this or will eventually the real cracks will appear and the baht will fall at a sharper rate...?

the foreign currency reserves of $ 103 billion (status june 2008) are bloody high for an economically relatively insignificant country like Thailand. in other words the BOT has enough cash to intervene in the markets for quite some time to come.

That is one high reserve, i might sound stupid here but i guess the UK has foreign reserve aswell. Why can't the BOE do something similar to try and support the sterling freefall? I guess the scale of the UK problem is on a much higher scale and could not be controlled in this way or pointless in the long run...

Historically the foreign currency reserves of just about any country seem to have been inadequate to protect their currency versus the huge amounts flowing through the exchange markets.

does not apply to Thai Baht presently. however it did apply in 1997.

[Naam]

Regards volatility, I look over the currency charts every day and see the baht making a steady and gradual increase day by day. This is broken by huge spikes of someone selling baht at far below market price.

no such thing exists

[The Vulcan]

If you think the baht is strengthening take a look at todays dollar rate according to Reuters

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http://uk.news.yahoo.com/rtrs/20080903/tts...ps-23286d5.html

[Naam]

The Central Bank continue to step in when they notice a sharp fall in the baht currency, can they continue to do this or will eventually the real cracks will appear and the baht will fall at a sharper rate...?

the foreign currency reserves of $ 103 billion (status june 2008) are bloody high for an economically relatively insignificant country like Thailand. in other words the BOT has enough cash to intervene in the markets for quite some time to come.

Indeed...but it's a bluddy waste to intervene with such valuable money.....it's easier spent than made, especially these fine days Thailand is going thru

Those $ 100+ Billions are needed for bad times and those days are here now already.

LaoPo

i [not so] humbly beg to differ as foreign currency reserves cannot be used to prop up a sluggish economy. their main use is to pay for imports and (in rare cases) to service sovereign debt.

[Naam]

If you think the baht is strengthening take a look at todays dollar rate according to Reuters

Reuters employs quite a number of journ@sslists who neither know basic arithmatic nor do they know that there is a huge big difference between a billion in the U.S. and a billion in continental Europe.

[VegasVic]

I think they target the dollar as that is he currency oil is bought in. Seem to me easier to just use the dollar and buy the oil.

But the other side of the coin maybe they see what they are doing as a hedge on inflation. Don't know not that sharp.

One thing for any bank account over used will eventually be empty.

Ray you seem to be sharp enough to have encapsulated what is occurring and why in just a few sentences. I think the fact that foriegn investors have been net sellers in the SET this year has put additional pressure on the baht, and the current correction in the Dollar has definately occured at a most inopportune time for the BOT. I understand the actions of the BOT, but just as they were unable to hold the baht in the 35-36 range vs. the Dollar when the baht was appreciating, the same will hold true now that the baht is headed the other direction. Given what is occuring currently in Thailand I think that the BOT should be keeping the bulk of that powder dry, because there are liable to be a few very rainy days in Thailands future!

[Naam]

question for The Right Honourable Lannarebirth, Esq.:

what are the chicken entrails telling you about USD/EUR?

Bloomie voodoo graph shows strong resistance at 1.4350, i tend to agree and have just closed my straight forward.

[lannarebirth]

question for The Right Honourable Lannarebirth, Esq.:

what are the chicken entrails telling you about USD/EUR?

Bloomie voodoo graph shows strong resistance at 1.4350, i tend to agree and have just closed my straight forward.

I'm not sure what a straight forward is. Is that a long future contract? I don't have Forex charts so I'll have to speak in terms of futures.

Anyhow, as the $USD is currently in an uptrend, if I were trading it (which I'm not)(got plently of $XAU puts though ), I would be looking to sell Euros at resistance, rather than buy at support, till it proves it's strength. It broke below a major trendline yesterday and that trendline is now resistance until proven otherwise.

Intermediate term closeup:

Intermediate term longer range:

When major trendlines are broken with a weekly closing price (hasn't happened yet) I look for continued weakness, then at some point find support and then come back to hit the underside of the trendline in what's called the "kiss of death". You can see it happened in late '04, but the trendline was so steepit couldn't provide resistance for long. Flatter trendlines provide less climbing room.

Long term:

I have alot of stuff that says somewhere down near 1.35 is a good place to try a long (which I'd sell if it returned to the underside of that trendline), otherwise I'd be looking to buy strength, which for me would be back above the weekly 34ema.

You know, I've been posting a lot lately because I've worked a lot this year, but currencies really aren't my thing. I'm just giving you my version of basic T/A. Good luck whatever you do.

[Naam]

question for The Right Honourable Lannarebirth, Esq.:

what are the chicken entrails telling you about USD/EUR?

Bloomie voodoo graph shows strong resistance at 1.4350, i tend to agree and have just closed my straight forward.

I'm not sure what a straight forward is. Is that a long future contract?

a straight forward is buying or selling x-amount of y-currency vs. z-currency @ specific date in the future. not to be mixed up with futures or options (which i think are obsceneties) but thanks for your reply.

[mommysboy]

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

Quote of the day in the

LaoPo

Yes I think this one deserves another ha, ha, ha.

Regarding the question, the bt is being propped up at the moment. The pound is the whipping boy currency as the UK economy appears to be heading for recession. Investors are pulling out of sterling for fear of poor returns. The shorters exaggerate the problem.