Perplexed

[Issangeorge]

Perplexed, can someone please explain to me why the Thai Baht has maintained a value of around 35 baht to the US dollar over the last two months when just about every other currency in the world has dropped. Thailand’s economy is falling like a stone dropped in water, it’s government has had to relocate to Chiang Mai and seems to have no power, the military won’t support it and even the police seem to only half heartily follow orders. People can no longer enter or leave the country, and yet the baht is maintaining its value. What’s going on? Are the financial wizards as stupid as they seem or am I missing something? I would have thought the baht would have dropped to well below 40 by now. A perplexed Issangeorge.

[slapout]

Sorry I can not answer your question, but I do like the fact that the dollar is stronger against the baht. I am sure the experts will give your question a whirlwind answer of hot air but doubt if any of them have made money on the swing (30 to 35) so they probably are not too sure either. One explanation I read was the dollars were required to pay back debts of various business groups as well as governments involved in the world wide financial mess. The one thing I remember is the saying "only 2 things are certain in life, death and taxes" From my life experience I feel it should be four things and add " A continual change of both weather, and economic conditions through out the world"

[PaddyThai]

Don't know why this is in Farming Forum, but I agree it has me dumbfounded. Many Thais working here in Ireland are deferring sending money home as exchange rate is so bad. If that attitude is reflected by Thais expats worlwide then Thailand is losing out yet again.

We all expect the Thai baht to drop like a stone some day, hence our own hesitancy to send money over.

[Mosha]

The perception is, the BOT are buying dollars. They like to maintain a tie to the USD, so by propping up the dollar they policy have having a set value seems to work out. However eventually the war chest wil empty, and the Baht must surely fall. The current policy is not making sense as it is costing jobs, by hurting Thai exports, icluding food stuffs.

[Maizefarmer]

Its largely relative i.e. the dollar is in such a mess its self, but thata side - yes, it is strong, and in my opinion abnormally so.

But drop it is going to, that is for sure (within the next 6 - 12months) - and it will be a significant drop.

If you look at developing countries, they all tend to follow an ecomonic model that shows that recession in West tends to have its effect on these countries some 12 - 18months after it starts in the West - as committed export contracts are filled and then not followed up with new contracts, and as the auto industry cuts its sales (Thailand is the worlds largest export manufacturer of pickups).

Making it worse for Thai Industry is that it is already struggling to keep its export figures up (because of the Baht strength) - now it has to try to stimulate exports by cutting costs.

Collectively I can't see any option but for the Baht to start heading South over the next year.

From a tourist perspective - well, thailand has always been a bit of budget destination for a large percentage of the tourists that come here (relative to other "sun sea @ sand" destinations - so hard to say, but whats going on at the moment at the airports is costing dear big time.

[PaddyThai]

I'm perplexed by the fact that more people on this forum are not perplexed and offering their views.

[somo]

There was similar discussion elsewhere on the forum and it does seem that the BOT has a big stash of dollars that it is using to keep the Baht/$ rate stable. Being from the UK though this has hit me hard as sterling has fallen steeply against the $ and now it only buys around 51 baht against 64 a year ago.

Because trading in Baht on the currency exchanges is small I guess it doesn't take that much for the BOT to be able to regulate the rate but why they are doing it is beyond me.

[pete_r]

AFAIK maintaining a strong Baht was a measure to control inflation earlier this year, when food and petrol prices were going through the roof. Now that the prices have cooled down, the BOT may want to re-consider the policy.

[Naam]

The perception is, the BOT are buying dollars. They like to maintain a tie to the USD, so by propping up the dollar they policy have having a set value seems to work out. However eventually the war chest wil empty, and the Baht must surely fall. The current policy is not making sense as it is costing jobs, by hurting Thai exports, icluding food stuffs.

your perception is "slightly" flawed if the BoT was buying Dollars the Baht would weaken. what the BoT does is SELLING Dollars (which are still in abundance in their coffers) to maintain a certain USD/THB range respectively an orderly depreciation of THB.

[Pakeha]

Yes perplexed indeed IsaanGeorge!

My curency has dropped 30% against the baht over the past 3 months ... Whilst I hope Thailand prospers I am dumbfounded that the airports can be shut down, foreign investment decreased, tourism halved, the government in semi-turmoil and the baht remains stable.

Surely it will sh_t its pants very soon....

[lannarebirth]

I'm perplexed by the fact that more people on this forum are not perplexed and offering their views.

I think the reason more people aren't offering their views is because the assumption made in the OP is not correct. The Baht has been weakening for months, not holding steady or appreciating. It paused for atime at known support points, traded through them and continues to weaken. Next support is in THB:USD 38 range. It doesn't have to go there all at once.

[gerry77]

I'm perplexed by the fact that more people on this forum are not perplexed and offering their views.

I think the reason more people aren't offering their views is because the assumption made in the OP is not correct. The Baht has been weakening for months, not holding steady or appreciating. It paused for atime at known support points, traded through them and continues to weaken. Next support is in THB:USD 38 range. It doesn't have to go there all at once.

Rubbish. Because, if the Thai Baht is weakening then how is it ever possible that the English Pound and Aussie dollar are worth less and less every day !

[lannarebirth]

I'm perplexed by the fact that more people on this forum are not perplexed and offering their views.

I think the reason more people aren't offering their views is because the assumption made in the OP is not correct. The Baht has been weakening for months, not holding steady or appreciating. It paused for atime at known support points, traded through them and continues to weaken. Next support is in THB:USD 38 range. It doesn't have to go there all at once.

Rubbish. Because, if the Thai Baht is weakening then how is it ever possible that the English Pound and Aussie dollar are worth less and less every day !

The Thai Baht is weakening against the $USD, which is the only western currency it trades against (aside form niche pairings at some FX sites). All other western currencies are currently trading lower against the $USD as well, and at a greater percentage than is the Thai Baht. Like nearly everything else on earth, you are all the other side of the $USD trade.

This is just a wild guess, but I think you'll be looking back at this time as the "good old days" re: THB:GBP exchange rates.

The GBP:THB exchange rate is an extrapolation of the GBP:USD trade and the THB:USD trade.

Edited December 4, 2008 by lannarebirth

[Japhrodisiac]

The perception is, the BOT are buying dollars. They like to maintain a tie to the USD, so by propping up the dollar they policy have having a set value seems to work out. However eventually the war chest wil empty, and the Baht must surely fall. The current policy is not making sense as it is costing jobs, by hurting Thai exports, icluding food stuffs.

your perception is "slightly" flawed if the BoT was buying Dollars the Baht would weaken. what the BoT does is SELLING Dollars (which are still in abundance in their coffers) to maintain a certain USD/THB range respectively an orderly depreciation of THB.

Agreed, but what is your prediction in terms of how long they can last, and how long they should be doing this to give the illusion of a strong economy? The treasury reserve is only 80-100B USD in healthy times, so what is left at the moment after many months of selling? Selling large amounts of an appreciating currency to prop up a currency that is highly likely to be worth less shortly seems like an interesting monetary policy...

[Naam]

The perception is, the BOT are buying dollars. They like to maintain a tie to the USD, so by propping up the dollar they policy have having a set value seems to work out. However eventually the war chest wil empty, and the Baht must surely fall. The current policy is not making sense as it is costing jobs, by hurting Thai exports, icluding food stuffs.

your perception is "slightly" flawed if the BoT was buying Dollars the Baht would weaken. what the BoT does is SELLING Dollars (which are still in abundance in their coffers) to maintain a certain USD/THB range respectively an orderly depreciation of THB.

Agreed, but what is your prediction in terms of how long they can last, and how long they should be doing this to give the illusion of a strong economy? The treasury reserve is only 80-100B USD in healthy times, so what is left at the moment after many months of selling? Selling large amounts of an appreciating currency to prop up a currency that is highly likely to be worth less shortly seems like an interesting monetary policy...

sorry, i'm Naam, not Ms Tarisa.

[lannarebirth]

The perception is, the BOT are buying dollars. They like to maintain a tie to the USD, so by propping up the dollar they policy have having a set value seems to work out. However eventually the war chest wil empty, and the Baht must surely fall. The current policy is not making sense as it is costing jobs, by hurting Thai exports, icluding food stuffs.

your perception is "slightly" flawed if the BoT was buying Dollars the Baht would weaken. what the BoT does is SELLING Dollars (which are still in abundance in their coffers) to maintain a certain USD/THB range respectively an orderly depreciation of THB.

Agreed, but what is your prediction in terms of how long they can last, and how long they should be doing this to give the illusion of a strong economy? The treasury reserve is only 80-100B USD in healthy times, so what is left at the moment after many months of selling? Selling large amounts of an appreciating currency to prop up a currency that is highly likely to be worth less shortly seems like an interesting monetary policy...

sorry, i'm Naam, not Ms Tarisa.

Yes, you are, and it's dam_n good to see you. I hope you are mending well and not giving the Mrs. too difficult of a time..

PS: Say, you know those rolls that are dipped in lye and have that rock salt crust, don't know the name, could you pick me up some?

I just love those. They still on your diet?

[cclub75]

ThaiCrisis gave some (possible) explanations about what he calls the "THB mystery".

I believe that the BOT is about to change its policy, exactly like the chinese are doing, with one obsession : Save Private Exports (by lowering exchange rate).

Until now, the thai authorities were able to put their head into the sand and pretend to ignore the fallouts of the global economic downturn. Thailand was blessed and "insulated". Of course.

They can't anymore doing so for 2 reasons :

-exports start to be under pressure (october, very low year on year growth)

-and we had an horrible GDP Q3 report (in which change in inventories.... made 2/3 of the "growth").

Add to this the political circus.... and indeed we shall get all the ingredients for a weakening THB.

The best proof : the so called "big surprise", "historic" blablbla interest rates cut announced yesterday. It shows that they start to feel the fire at their axxxe.

Like everybody else.

But like people said previously, the BOT likes to take its time... to pretend its controls the pace.

Edited December 4, 2008 by cclub75

[Naam]

The perception is, the BOT are buying dollars. They like to maintain a tie to the USD, so by propping up the dollar they policy have having a set value seems to work out. However eventually the war chest wil empty, and the Baht must surely fall. The current policy is not making sense as it is costing jobs, by hurting Thai exports, icluding food stuffs.

your perception is "slightly" flawed if the BoT was buying Dollars the Baht would weaken. what the BoT does is SELLING Dollars (which are still in abundance in their coffers) to maintain a certain USD/THB range respectively an orderly depreciation of THB.

Agreed, but what is your prediction in terms of how long they can last, and how long they should be doing this to give the illusion of a strong economy? The treasury reserve is only 80-100B USD in healthy times, so what is left at the moment after many months of selling? Selling large amounts of an appreciating currency to prop up a currency that is highly likely to be worth less shortly seems like an interesting monetary policy...

sorry, i'm Naam, not Ms Tarisa.

1. Yes, you are, and it's dam_n good to see you. I hope you are mending well and not giving the Mrs. too difficult of a time..

2. PS: Say, you know those rolls that are dipped in lye and have that rock salt crust, don't know the name, could you pick me up some?

I just love those. They still on your diet?

1. considering what i went through i am indeed mending well staying now in a rather luxurious rehabilitation clinic in Southern Bavaria. but it was the Mrs who gave me a difficult time because she wanted to stay with me as she did in the hospital where the surgery was performed. however, i refused and as she couldn't fly back because of the problems at Swampy she is now (frothing around her mouth) touring Europe and visits old friends till we meet dec 16th to fly together MUC-DOH-BKK if not some àssholes occupy Swampy again.

2. the rolls you mentioned are still on my daily diet but i get the same or better quality in Pattaya.

p.s. i do a daily walk in the snow in the attached park and i have managed day before yesterday a new record of 3 minutes and 45 seconds before i returned to the building

[Pakeha]

ThaiCrisis gave some (possible) explanations about what he calls the "THB mystery".

I believe that the BOT is about to change its policy, exactly like the chinese are doing, with one obsession : Save Private Exports (by lowering exchange rate).

Until now, the thai authorities were able to put their head into the sand and pretend to ignore the fallouts of the global economic downturn. Thailand was blessed and "insulated". Of course.

They can't anymore doing so for 2 reasons :

-exports start to be under pressure (october, very low year on year growth)

-and we had an horrible GDP Q3 report (in which change in inventories.... made 2/3 of the "growth").

Add to this the political circus.... and indeed we shall get all the ingredients for a weakening THB.

The best proof : the so called "big surprise", "historic" blablbla interest rates cut announced yesterday. It shows that they start to feel the fire at their axxxe.

Like everybody else.

But like people said previously, the BOT likes to take its time... to pretend its controls the pace.

cclub75 - Does this mean the bot will not just focus on trading THB/USD and will start to trade with other currencies? If so does it mean people with USD are best to exchange to THB now?

[yabaaaa]

p.s. i do a daily walk in the snow in the attached park and i have managed day before yesterday a new record of 3 minutes and 45 seconds before i returned to the building

What!!! they've attatched a park to you??? God-dam_n i knew these type of blunders occurred but suspected only in "third world" type countries. ......... bit like sawing off the wrong leg!