Strong Baht

[Kimera]

Can anybody please clearly explain why the Baht remains strong with all the global and the present internal problems in Thailand

[phaethon]

Can anybody please clearly explain why the Baht remains strong with all the global and the present internal problems in Thailand

It's not particulalry, it's just that the other (Western) currencies are basket cases at the moment.

[PeaceBlondie]

Central banks have injected over 100 bilion Dollars this week - maybe twice that much - into the world economies, for liquidity. The baht got stronger against the dollar yesterday. Have the central banks flooded the market with dollars?

[morphic]

Nobody really knows but my theory is that the recent strengthening of the THB versus the USD is due to hedge funds and banks buying back the THB. They had all sold thinking Thailand has many problems and that its currency should weaken and for a while it did.

But due to all the market turmoil hedge funds and banks have been unwinding whatver trades they had before. So if many had sold THB then many need to buy it back.

If their original reasons were correct then this shouLd be temporary and in fact may be a selling opportunity.

[Kimera]

Yes thanks is there any more input ?

[VegasVic]

Yes thanks is there any more input ?

The main reason the the baht appreciated so rapidly over the past 2 1/2 years is the fact that there was wild speculation in markets outside of the U.S. and Europe, particularly in China and Asia. Now that these trades are unwinding and markets are coming down (or crashing as in China and Russia and soon to be India) the baht has begun to weaken, most noteably vs. the U.S. Dollar. The Baht ,Euro and Pound all strtengthened a bit this week due to the uncertainty of the U.S. bailout plan, but the trend for all three currencies vs. the Dollar is down from these levels. The BOT has substantial Dollar reserves that it has been selling in order to try and support the Baht from falling further, but in the long run as Europe heads into recesssion and the ECB has to cut rates and as U.S. and European hedge funds and mutual funds face continuing redemtions and are forced to sell more of their holdings across the board(particularly in Asia), I would expect to see the baht gravitate back to the 41-43 range. This level is the median range that the baht has gravitated back to time and time again since the 97 crisis.

[Naam]

Central banks have injected over 100 bilion Dollars this week - maybe twice that much - into the world economies, for liquidity. The baht got stronger against the dollar yesterday. Have the central banks flooded the market with dollars?

and my uneducated guess is that it will get stronger vs. the Dollar on monday. the "mother of all bail-outs" in the U.S. made traders and investors cash in recent profits by dumping the dollar. 10% in five weeks are just too tempting.