How Long Before Baht Plummets ?

Heng · December 8, 2008

Just broke 38 early today!

edit:

Really? Do you have any URL?

38.15 on Oanda. Yeah, as mentioned it's lower onshore.

Still, gotta love the trend.

Heng · December 8, 2008

snip

Heng rocks? I hear ya.

Edited December 8, 2008 by Heng

lannarebirth · December 8, 2008

Just broke 38 early today!

edit:

Really? Do you have any URL?

38.15 on Oanda. Yeah, as mentioned it's lower onshore.

Still, gotta love the trend.

http://finance.yahoo.com/q/bc?s=USDTHB=X&a...l&q=l&c=

churchill · December 8, 2008

Looks like a drawing my daughter would do - This one better ?

http://finance.yahoo.com/q/bc?s=USDTHB=X&a...&q=l&c=

Trend , trend , trend

lannarebirth · December 8, 2008

Looks like a drawing my daughter would do - This one better ?
http://finance.yahoo.com/q/bc?s=USDTHB=X&a...&q=l&c=

Trend , trend , trend

Not really, since it ends on December 5th. With Yahoo you need to go to short time frame to get accurate charted price. The quotes are accurate though.

jdrake72 · December 13, 2008

can anyone tell me why the thai baht has been pretty much unaffected by the past political turmoil? (especially that the airport was blockaded for a week) the baht barely dropped!!! (i'm comparing it to the pound and the dollar).
i heard somewhere that thailand has MASSIVE gold reserves or surplus cash. (does this have any baring on the situation, and can it run dry)?

i am just suprised that after 6 months of political uncertainty and especially the past airport siege AND world-wide economic depression, that the thai baht has pretty much kept its value!!!

can anyone explain this?

and also any predictions for the upcoming future of the baht?

basically, is thailand just delaying its economy collapse because of its reserves? or is it truly lucky enough to be unaffected?

yes, I agree with you and the guy who stated Tarisa is stubborn and that s can actually make things worse in the future.

BOT is just buying time for an unclear reason, Thailand reserves are huge and they are allowing BOT to keep the baht afloat, but actually Thai reserves are dropping very fast, which means pressures for a baht devaluation are strong.

Why should BOT consuming the reserves just to delay the unavoidable ?

I think there are powers ,somebody who tells BOT what they have to do with the baht, I don't think it is all in the Tarisa's hands.

See some facts:

-After the airport seizures (something it happens in very few countries like Somalia or similar) growth forecast has been furtherly dramatically dropped for 2009

-up to 2 million Thais may loose their jobs, which could be one of the highest uneployemtn rates in Thailand for many years

-Thai Baht against a basket of currency is actually getting stronger and Baht has lost competiveness against many countries

-Export surplus and budget surplus are actually turing to twin deficits

-Consumer sentiment is at its lowest point in 7 years

-Interest rates have been slashes more than expect, a full point percentage and more cuts are likely.

-IMPORTANT: Standard and Poors has downgraded Thai risk to negative

-Toursim and export industry have been terribly affected by airport seizures and political instability

-Thai politics is the most uncertain and unstable of the region

-we still have volatile situation in the south with dauly bombs and deaths

-agriculture and fishery may have negative growth in 2009

-Megaprojects are stalling and housing market growth has frozen

-Other regional currencies has lost value against the US$ much more than Thai Baht without all problems of Thailand (although they may fall into slight recessions in 2009). For example,Korean won, Philippines peso, Indian rupiah etc...are approaching their lowest level after the 1997 crisis when Thai Baht reached 56 for 1$.

-Thailand is still very "unfriendly" for foreign investors and it is tighting its grip on tourism too with latest changes (I don t want to discuss if you agree with that or not, I just want to state a matter of fact).

In my humble opinion Thai Baht today is very overvalued and should be at least at 40 for 1 US$ if not 45.

The quantity of reserves used to buy bahts and sell dollars to sustain the baht are a clear sign of that.

When reserves will start to reduce ,baht could plummet even faster as they would allow to do today.

So I agree with you that BOT stubborness in managing the exchange rate is not very wise and it is not resolving anything but delaying the problem.

A Cheaper baht would incourage foreigners to invest and to come here . Losing as many as 5-6 million tourists next year (Govt forecast) Thailand is not in the position of rejecting more but it should try to lure more of them.

Edited December 13, 2008 by jdrake72

Esper · December 13, 2008

It is absolutely insane that the baht is so high.

In the last month, the PM was driven from office (and his government is now sacked), the airports were under siege, there have been clashes between two violatile factions (redshirts and yellowshirts) that threaten to continue, the economy is collapsing, the MNCs are pulling out of BKK, real estate is dead, there are travel warnings against travelling to Thailand, and the country's PR is in tatters; yet the currency continues to sail upwards. (Whereas at around the same time, in the UK a member of the Opposition mentioned that the country will be officially in recession next year, which everybody already knew, and the pound sterling dropped another 10%.)

The government must be propping up the currency somehow. But for what? Isn't this just the worst time to have a strong baht, when you need to encourage foreign investment, tourism and exports? Especially if these collectively are supposed to make up the majority of the country's GDP

I was trapped in BKK when the airports were besieged, but managed to get on one of the first flights out of BKK to Phuket on Air Asia. BKK's hotels are reporting terrible occupancy levels at a time when they were expecting to be nearly full. Phuket wasn't even under siege but the effects of the political unrest have made a terrible impact on livelihoods out here. All hotels are laying off staff - the Marriott is said to be making 50% redundant. The beaches are empty at a time when they would be packed, as we approach the peak of high season. Even the massage ladies are undercutting each other. Many small businesses will go under, those small fragile ones that were looking for that break in life.

There is a strangled air of desperation about. I feel for the people, smiling and saying that within a few months all will be back to normal. But when the baht is so high against western currencies? Most farangs already based here in fact are talking about selling up and moving, because their income has been decimated -more defection of capital...

The Thai authorities really need to rethink their fiscal strategy...

mommysboy · December 13, 2008

It is insane, markets often are.

On top of that one wonders why on earth it is being propped up! especially as exports have been badly hit and Asian powerhouse China has devalued it's currency effectively.

But it';s also about the insanity surrounding the pound and numerous other European sovereign currencies.

To take the pound as an example, yes sure UK is in a worse recession, but is this any reason that it should fall 25% against Euro? I think not.

I happen to think the Bt is being held high for ulterior motives. When will it topple? Not for a few months yet, but when it goes, it will go big time, eg 50 to dollar, Euro 55. Against the pound ! that depends on the pound too, I reckon initially 60bt.

Just my prediction.

Interesting posting

ronz28 · December 13, 2008

I have heard that it is impossible for a country to prop up their currency for any length of time. The rest of the world has been as bad off as Thailand prior to the airport fiasco, however, now that the speculators are seeing the impact on the Thai economy I wonder too when they will short the Baht.

Ricardo · December 13, 2008

Agree with the OP that it is being held up by the government, acting through the BoT, and that this is totally illogical as it harms already-shellshocked exporters and tourism.

As to when this will change, I think you need to see the new government in power, and that things may then happen. But whether it will be a quick devaluation, or a slow/managed adjustment, who knows ?

pete_r · December 13, 2008

I happen to think the Bt is being held high for ulterior motives.

Good point. Earlier this year the policy might have been a tool to control inflation, but today I see no reason for it. Maybe some "inside" people are busy selling their Bahts, before giving the let go signal to the BOT?

dumball · December 13, 2008

It appears that the monetary department of the government will not be assembling for another month to discuss these important issues , head in the sand or subterfuge in mind ?

moneyshot · December 13, 2008

Has anyone a clue to how much the BOT would be spending per month to keep the Baht strong?

Naam · December 13, 2008

Thailand reserves are huge and they are allowing BOT to keep the baht afloat, but actually Thai reserves are dropping very fast, which means pressures for a baht devaluation are strong.

says WHo? THB is a Mickey Mouse currency as far as size/volume is concerned and can be easily manipulated with a tiny fraction of the sum needed for interventions in major "real" and unrestricted currencies.

mahtin · December 13, 2008

Bendix, where are you when we need you?

waza · December 13, 2008

Thailand reserves are huge and they are allowing BOT to keep the baht afloat, but actually Thai reserves are dropping very fast, which means pressures for a baht devaluation are strong.

says WHo? THB is a Mickey Mouse currency as far as size/volume is concerned and can be easily manipulated with a tiny fraction of the sum needed for interventions in major "real" and unrestricted currencies.

Please explain

mahtin · December 13, 2008

Excellent first post, by the way.

Will bookmark your nick, OP

Ricardo · December 14, 2008

It appears that the monetary department of the government will not be assembling for another month to discuss these important issues , head in the sand or subterfuge in mind ?

Just the fun Christmas present-buying season, and important New Year parties, after all this isn't of any vital importance to the Thai economy & peoples' jobs, you know !

I suspect that all influential or wealthy people must surely, by now, have got the message and moved their liquid-funds into hard-currency, don't you think ? They remember 1997 and recognise the signs. But what about those whose money is temporarily 'tied-up' ? Better send the wife over, to sort that one out, and she can visit her sick mother while she's there !

0Mix1up · December 14, 2008

what the klingon hasn't come to reprimand you?

thais or even westerners with big amts of baht buying gbp or aud or?

could see a 30% up on there $

with in a short period

i would say thats 1 reason whys it being artificially propped.

Tyke · December 14, 2008

I think the problem is the weakness of many western currencies, which are being battered by the financial crisis more than Thailand at the moment, rather than the strength of the Baht, that is the cause. The interest rates are also important and they are dropping very rapidly in the west. So I don't believe we should blame this onto the Thais - it's a home grown problem in the west this time. What is more surprising is the strength of the dollar when all these problems stem from the corrupt, unregulated financial system over in the USA. We should be asking the question, why is the dollar so strong? If anything, because the Baht is tied to the dollar, then it's strength results from that, rather than any spurious explanation that some dark forces in the Thai economy are at work.

henryalleman · December 14, 2008

The Baht is gliding slowly already towards the Euro

on Nov 20 1 Euro=43,71

on Dec 12 1 Euro=46,41

chiangmaibruce · December 14, 2008

Has anyone a clue to how much the BOT would be spending per month to keep the Baht strong?

1. This thread is a duplicate of another in the business/investment sub-forum

2. See attached graph taken from the thaicrisis blog http://thaicrisis.files.wordpress.com/2008/11/botres1.gif - an excellent read

- CB

prop_up_baht60.bmp

Maestro · December 14, 2008

I am merging this topic “When Will The Baht Fall” with the earlier topic “How Long Before Baht Plummets ?, Iam waiting !!!!!”

--

Maestro

jdrake72 · December 14, 2008

Thailand reserves are huge and they are allowing BOT to keep the baht afloat, but actually Thai reserves are dropping very fast, which means pressures for a baht devaluation are strong.

says WHo? THB is a Mickey Mouse currency as far as size/volume is concerned and can be easily manipulated with a tiny fraction of the sum needed for interventions in major "real" and unrestricted currencies.

Please explain

Thailand is selling its reserves in US$ and buying baht to sustain its articifial and overvalued value.

You can see the statistics about the reserves , Thai reserves are still huge, but they are dropping quite fast.

That s is a clear signal that baht is overvalued, otherwise they wound t need to keep this pseudo-pegged or managed exchange rate.

All the times Central Banks of any country have tried to keep its currency pegged to another one (dollar,or euro) despite strong pressure to devaluation, it has resulted in a even stronger plunging of the currency after some time.

If Thailand in few months will start to run short of reserves, it will be hard to keep this exchange rate and at that point if they will decide to float the baht, the pressure could plunge the baht very strongly and panic and speculators could make things even worse.

That s why I don t thing BOT is doing the right thing. It is just buying time.I cannot understand BOT strategy in the medium term, if they have one.

If BOT is so afraid to let the baht floating, it means they are afraid of a strong depreciation, if they don t know how to manage it, the best thing (TEMPORALY) should put two bands within the baht can float.

Than, after some time, after watching the market trend, they could decide to wide the bands or remove them.

If they are afraid, they should free the exchange rate gradually.

Edited December 14, 2008 by jdrake72

Maestro · December 14, 2008

…Thailand reserves are huge and they are allowing BOT to keep the baht afloat, but actually Thai reserves are dropping very fast…

From www.xe.com/news/Fri%20Dec%2012%2002:46:00%20EST%202008/127173.htm?categoryId=1&currentPage=4:

Thai foreign reserves $105.8 bln on Dec 5
2008-12-12 07:46 (UTC)

BANGKOK, Dec 12 (Reuters)

Graph based on the table on the linked web page:

--

Maestro

cclub75 · December 14, 2008

See some facts:
-After the airport seizures (something it happens in very few countries like Somalia or similar) growth forecast has been furtherly dramatically dropped for 2009

-up to 2 million Thais may loose their jobs, which could be one of the highest uneployemtn rates in Thailand for many years

-Thai Baht against a basket of currency is actually getting stronger and Baht has lost competiveness against many countries

-Export surplus and budget surplus are actually turing to twin deficits

-Consumer sentiment is at its lowest point in 7 years

-Interest rates have been slashes more than expect, a full point percentage and more cuts are likely.

-IMPORTANT: Standard and Poors has downgraded Thai risk to negative

-Toursim and export industry have been terribly affected by airport seizures and political instability

-Thai politics is the most uncertain and unstable of the region

-we still have volatile situation in the south with dauly bombs and deaths

-agriculture and fishery may have negative growth in 2009

-Megaprojects are stalling and housing market growth has frozen

-Other regional currencies has lost value against the US$ much more than Thai Baht without all problems of Thailand (although they may fall into slight recessions in 2009). For example,Korean won, Philippines peso, Indian rupiah etc...are approaching their lowest level after the 1997 crisis when Thai Baht reached 56 for 1$.

-Thailand is still very "unfriendly" for foreign investors and it is tighting its grip on tourism too with latest changes (I don t want to discuss if you agree with that or not, I just want to state a matter of fact).

In my humble opinion Thai Baht today is very overvalued and should be at least at 40 for 1 US$ if not 45.

The quantity of reserves used to buy bahts and sell dollars to sustain the baht are a clear sign of that.

When reserves will start to reduce ,baht could plummet even faster as they would allow to do today.

Great summary.

But still, as you said, the BOT continues to play the delaying card....

Look at the datas of foreign currency reserves, per week:

http://www.bot.or.th/English/Statistics/Ec...lReserves.aspx#

Forward positions have declined a lot... But as for the foreign currency reserves, the movement is much slower... They even managed to increase it during the last 2 weeks ! (exactly during the airport crisis, and I think it's not a coincidence).

But there is one interesting idea pointed out by ThaiCrisis : 60 %.

The BOT (Tarisa herself) said that reserves were 60 % "no less" made of USD... Let's assume that it's true and that the 40 % left are Euro... If one week, the USD is going down versus EUR, then mechanically the total amount of foreign currency reserves of BOT (accounted in USD)... will go up, right ? Leading to false impression of stability or even increase (like we had on the 2 last weeks).

What do you think ?

Edited December 14, 2008 by cclub75

Maestro · December 14, 2008

…Thailand is selling its reserves in US$ and buying baht to sustain its articifial and overvalued value…

Are you saying that the BOT is selling foreign currency in order to keep the Baht strong? Is this how it works?

--

Maestro

lannarebirth · December 14, 2008

Can somone give me a definition of what an "artificial" valuation is? TIA

meom · December 14, 2008

…Thailand is selling its reserves in US$ and buying baht to sustain its articifial and overvalued value…

Are you saying that the BOT is selling foreign currency in order to keep the Baht strong? Is this how it works?

--

Maestro

Or is it just a case of foreign investors changing their baht investments back into dollars?

Maestro · December 14, 2008

Or is it just a case of foreign investors changing their baht investments back into dollars?

That would be buying dollars with Baht, the opposite of what jdrake says is strengthening the Baht.

--

Maestro

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