Time To Devalue The Baht?

[Maizefarmer]

Well it would seem to me what with all the political problems at the moment i.e. reds yellows blues etc.The eye is off the ball where the economy is concerned. So time to devalue the Baht say 30% and this should give the economy a needed boost.

This would give the Tourism industry a well needed boost as the thought of a cheaper holiday would sway many away from worrying about the possible dangers of comming here.it would also give exports a well needed boost making exports cheaper from a overseas buyers point of view..

Ok imports would be more expensive but these are not always the average man in the streets purchase anyway.Yes I know fuel would be more expensive but this would surely be outweighed by the positives.

The downturn is hitting Thailand hard and will hit harder in the comming months so surely its better to act now and at least have some forign currency comming in?

Your thoughts TV.

Devaluation - its coming - oner way or the other i.e. I don't believe this time round devaluation as a Thai fiscal policy will be the desicion, but what is rather more likely is a swing in the baht's relative value.

You are indeed correct - there are enourmos pressures building up against the TB at the moment - stemming primarily from an ever worsening export situation: contracts related to Western brandname goods (e.g. Nike, Levi's, Timbrland, Lecoste ect ect ......) are big time - worse now than it was leading up to the devaluation in the 90's - and the pickup market has been hit real bad (Toyota for the first time in its exsistance is in the red - with its Thai production facilities accounting for for some 40% plus of its worldwide downturn in production - yes, just its Thai manufacturing lines accounting for not far off half Toyota's losses since the international credit crunch started.

In short it all piles up the pressure on the Thai manufacturing industry as Western production/manufacturing contracts slow down and/or are not been renewed.

...... add to all this a lack of international confidence in both the economic and political enviroment - a political system that is all but brankrupted and broken - and quite how Thailand can continue to run on a curency as overvalued as the TB is, I just dont know.

Expect a sharp turn around later this year - or dring the Q1/Q2 next year at latest.

Hang on to your forex guys - now is not the time to be using forex to invest in property/houses/apartments - you'll wake up one morning sometime over the next 6 - 12 months feeling very ill indeed if you do.

Is 30% a realistic figure? - absolutely, indeed I suspectthe longer this drags out the more conservation that figure starts to look. Last time round the Baht touched on 97 (to the Pound) - it moved in the space of a few months close on 100%. The problems this time round are just as big (if not more so in some sectors of the economy), so 30% is by no mans unrealistic.

[thunder30101]

Need to quit smoking so much corn silk i think, the pound was way overvalued as a currency anyway for too long. I dont see any reason for the thais to devalue their currency just so you can have more money to spend here. Toyota hurting because of the baht ? too funny. Personally I think it is about in the right spot.

[lannarebirth]

I think given the current political situation, global economy, and future royal issues, 41 is possible, maybe 44 on a spike down. After that I think it heads to 20THB:1 $USD in the next decade or so.

[RoastLamb]

Tourism only makes up about 5% of the GDP, so it's not that much of a big deal and certainly not big enough to devalue a currency. Exports, however, make up closer to 70% of the GDP and are being hit hard by the global economic downturn and the high value of the baht, amongst other things. Because of this I would be very suprised if we don't see a devaluation within the next 18 months. Hopefully it will happen before August so I can extend my stay by a week or two.

[ChiangMaiFun]

Well it would seem to me what with all the political problems at the moment i.e. reds yellows blues etc.The eye is off the ball where the economy is concerned. So time to devalue the Baht say 30% and this should give the economy a needed boost.

This would give the Tourism industry a well needed boost as the thought of a cheaper holiday would sway many away from worrying about the possible dangers of comming here.it would also give exports a well needed boost making exports cheaper from a overseas buyers point of view..

Ok imports would be more expensive but these are not always the average man in the streets purchase anyway.Yes I know fuel would be more expensive but this would surely be outweighed by the positives.

The downturn is hitting Thailand hard and will hit harder in the comming months so surely its better to act now and at least have some forign currency comming in?

Your thoughts TV.

Devaluation - its coming - oner way or the other i.e. I don't believe this time round devaluation as a Thai fiscal policy will be the desicion, but what is rather more likely is a swing in the baht's relative value.

You are indeed correct - there are enourmos pressures building up against the TB at the moment - stemming primarily from an ever worsening export situation: contracts related to Western brandname goods (e.g. Nike, Levi's, Timbrland, Lecoste ect ect ......) are big time - worse now than it was leading up to the devaluation in the 90's - and the pickup market has been hit real bad (Toyota for the first time in its exsistance is in the red - with its Thai production facilities accounting for for some 40% plus of its worldwide downturn in production - yes, just its Thai manufacturing lines accounting for not far off half Toyota's losses since the international credit crunch started.

In short it all piles up the pressure on the Thai manufacturing industry as Western production/manufacturing contracts slow down and/or are not been renewed.

...... add to all this a lack of international confidence in both the economic and political enviroment - a political system that is all but brankrupted and broken - and quite how Thailand can continue to run on a curency as overvalued as the TB is, I just dont know.

Expect a sharp turn around later this year - or dring the Q1/Q2 next year at latest.

Hang on to your forex guys - now is not the time to be using forex to invest in property/houses/apartments - you'll wake up one morning sometime over the next 6 - 12 months feeling very ill indeed if you do.

Is 30% a realistic figure? - absolutely, indeed I suspectthe longer this drags out the more conservation that figure starts to look. Last time round the Baht touched on 97 (to the Pound) - it moved in the space of a few months close on 100%. The problems this time round are just as big (if not more so in some sectors of the economy), so 30% is by no mans unrealistic.

Any ideas if this could happen in the next few weeks? I ask only on the news:

Quote from a reuters story:

The decision by Standard and Poor's to downgrade Thailand's local currency sovereign credit rating on Tuesday will hit the baht, although the rating agency affirmed the foreign currency credit rating, albeit with a negative outlook.

[DagonKhan]

Any ideas if this could happen in the next few weeks?

I believe we will see a gradual decline over a few months, I doubt it will be measured in weeks.

[Maizefarmer]

Nope - I am not of the opinion it will be that soon - if it is it will through devaluation be the Thai monetry authorities (and that is something they want to avoid like the plauge).

The initial tumble? - sometime towards the end of Q2 this year, or any time after that till the first part of next year - and the longer its left then the steeper will be that initial fall - then a gradual but steedy drop to somewhere in the 40's by the middle of next year - where it will bounce around for sometime, steady off then slowly build up again, just as it has done over the last 10years.

Guessing when a currency is going to turn round is just that - its a guess based on interperation of all sorts of inputs: if I knew when it was coming to within even 2weeks to a month, I'd be shorting all THB forex positions (in any case I have next to zero experiance with THB) - but one thing is certain: you can be sure its coming sometime later this year/first part of next year at the very latest - of that I am cast iron sure.

My father in law is a civil servant - the auditors came round about a month back to do his departments books: when they saw how bad the figures were, they explained to him that they would "loan" his department Baht xbillion (or whatever it was). "And what do I do with it when I get it", he asked.

"Oh, its not to be spent"', they said, "just hang on to it for a few weeks - its a parcel of money we use just for this purpose - we shunt it around from department to department, from section to section - its to make account balance look good for the auditor general - we know to within a week or so when he will be asking for the department/section balance"

.......!!!!!!!!! Right now - so as long as the figure is good on the day of inspection, all is okay is it.

Thai government coffers are bare bare bare.

[Mousehound]

The Thai BHT is overvalued. Australia has devalued against the TBHT 25-30% sice I was last there. I can not see that the Thai fiscal policy or situation is that much better than Australia. This has meant that we have cancelled our trips to Thailand and will not be placing our planned orders. Sure, this is a drop in the bucket. Two people now no longer coming to Thailand for six weeks a year and placing small orders is not going to make any difference on its own, but my guess is that this is symptomatic. Business here is still pretty good. We have the money to spend but we simply can't sell goods at the prices being asked.

We have no choice but to look elsewhere.

[ChiangMaiFun]

Nope - I am not of the opinion it will be that soon - if it is it will through devaluation be the Thai monetry authorities (and that is something they want to avoid like the plauge).

The initial tumble? - sometime towards the end of Q2 this year, or any time after that till the first part of next year - and the longer its left then the steeper will be that initial fall - then a gradual but steedy drop to somewhere in the 40's by the middle of next year - where it will bounce around for sometime, steady off then slowly build up again, just as it has done over the last 10years.

Guessing when a currency is going to turn round is just that - its a guess based on interperation of all sorts of inputs: if I knew when it was coming to within even 2weeks to a month, I'd be shorting all THB forex positions (in any case I have next to zero experiance with THB) - but one thing is certain: you can be sure its coming sometime later this year/first part of next year at the very latest - of that I am cast iron sure.

My father in law is a civil servant - the auditors came round about a month back to do his departments books: when they saw how bad the figures were, they explained to him that they would "loan" his department Baht xbillion (or whatever it was). "And what do I do with it when I get it", he asked.

"Oh, its not to be spent"', they said, "just hang on to it for a few weeks - its a parcel of money we use just for this purpose - we shunt it around from department to department, from section to section - its to make account balance look good for the auditor general - we know to within a week or so when he will be asking for the department/section balance"

.......!!!!!!!!! Right now - so as long as the figure is good on the day of inspection, all is okay is it.

Thai government coffers are bare bare bare.

Not sure what you mean... in mid-40s? the GBP is 51 today dont you mean go UP???

[thaihome]

Excuse me, but isn’t the baht currently at its lowest level against the USD in something like 2 years? It has lost something 20% over that time I believe.

Unfortunately for those of you that are not USD based, the strength of the USD has probably hit you very hard, as the baht is valued almost completely against the USD and other currencies rates are just calculated as USD to Baht.

TH

[Priceless]

Nope - I am not of the opinion it will be that soon - if it is it will through devaluation be the Thai monetry authorities (and that is something they want to avoid like the plauge).

The initial tumble? - sometime towards the end of Q2 this year, or any time after that till the first part of next year - and the longer its left then the steeper will be that initial fall - then a gradual but steedy drop to somewhere in the 40's by the middle of next year - where it will bounce around for sometime, steady off then slowly build up again, just as it has done over the last 10years.

Guessing when a currency is going to turn round is just that - its a guess based on interperation of all sorts of inputs: if I knew when it was coming to within even 2weeks to a month, I'd be shorting all THB forex positions (in any case I have next to zero experiance with THB) - but one thing is certain: you can be sure its coming sometime later this year/first part of next year at the very latest - of that I am cast iron sure.

My father in law is a civil servant - the auditors came round about a month back to do his departments books: when they saw how bad the figures were, they explained to him that they would "loan" his department Baht xbillion (or whatever it was). "And what do I do with it when I get it", he asked.

"Oh, its not to be spent"', they said, "just hang on to it for a few weeks - its a parcel of money we use just for this purpose - we shunt it around from department to department, from section to section - its to make account balance look good for the auditor general - we know to within a week or so when he will be asking for the department/section balance"

.......!!!!!!!!! Right now - so as long as the figure is good on the day of inspection, all is okay is it.

Thai government coffers are bare bare bare.

Not sure what you mean... in mid-40s? the GBP is 51 today dont you mean go UP???

I think that Maizefarmer is talking about THB versus USD, currently about 35.45. I.e. he is expecting a drop in the value of THB of about 10-20%. This does not seem unreasonable to me, I expect that we will see a very big drop in Thai exports over the next year.

/ Priceless

[chiang mai]

After that I think it heads to 20THB:1 $USD in the next decade or so.

I think this is the key message in this thread and I agree totally, I also think it's also possible that the short term spike downwards that was also mentioned may not happen except for one or two Baht perhaps.

[ChiangMaiFun]

Nope - I am not of the opinion it will be that soon - if it is it will through devaluation be the Thai monetry authorities (and that is something they want to avoid like the plauge).

The initial tumble? - sometime towards the end of Q2 this year, or any time after that till the first part of next year - and the longer its left then the steeper will be that initial fall - then a gradual but steedy drop to somewhere in the 40's by the middle of next year - where it will bounce around for sometime, steady off then slowly build up again, just as it has done over the last 10years.

Guessing when a currency is going to turn round is just that - its a guess based on interperation of all sorts of inputs: if I knew when it was coming to within even 2weeks to a month, I'd be shorting all THB forex positions (in any case I have next to zero experiance with THB) - but one thing is certain: you can be sure its coming sometime later this year/first part of next year at the very latest - of that I am cast iron sure.

My father in law is a civil servant - the auditors came round about a month back to do his departments books: when they saw how bad the figures were, they explained to him that they would "loan" his department Baht xbillion (or whatever it was). "And what do I do with it when I get it", he asked.

"Oh, its not to be spent"', they said, "just hang on to it for a few weeks - its a parcel of money we use just for this purpose - we shunt it around from department to department, from section to section - its to make account balance look good for the auditor general - we know to within a week or so when he will be asking for the department/section balance"

.......!!!!!!!!! Right now - so as long as the figure is good on the day of inspection, all is okay is it.

Thai government coffers are bare bare bare.

Not sure what you mean... in mid-40s? the GBP is 51 today dont you mean go UP???

I think that Maizefarmer is talking about THB versus USD, currently about 35.45. I.e. he is expecting a drop in the value of THB of about 10-20%. This does not seem unreasonable to me, I expect that we will see a very big drop in Thai exports over the next year.

/ Priceless

Ahhh right... I guess the effect on GBP will be the same though? an increase

[henryalleman]

Don't look to the Baht, should look to the US$ because they are linked.

[ChiangMaiFun]

Don't look to the Baht, should look to the US$ because they are linked.

Kow chai - but the GBP seems to follow the USD - it gets stronger the GBP against THB gets better

[ernest1966]

The longer the baht is propped up the bigger the avalanche will be when the big fall comes. Everyone keeps going on about, no that factor doesn't matter, but when practically all the economic factors are taken into account that give a fair and accurate representation of a currencies worth - well then you get the real picture, innit guv.

[ChiangMaiFun]

The longer the baht is propped up the bigger the avalanche will be when the big fall comes. Everyone keeps going on about, no that factor doesn't matter, but when practically all the economic factors are taken into account that give a fair and accurate representation of a currencies worth - well then you get the real picture, innit guv.

Let it fall, let it fall, let it fall (sung to let it snow etc.)

[lannarebirth]

After that I think it heads to 20THB:1 $USD in the next decade or so.

I think this is the key message in this thread and I agree totally, I also think it's also possible that the short term spike downwards that was also mentioned may not happen except for one or two Baht perhaps.

That's entirely possible. The only thing I know for sure is that it needs to test 35.80ish again. Then we'll see if it breaks through and retests it's lows or strengthens instead.

[henryalleman]

My income is in EURO, last year it was 1.43$ = 1 EURO, now its 1.29.

that's say it all.

As long the $ don't go down, the Thai Baht will remain high. And the last financial reports about US banks are signs that the $ will go down.

[Oberkommando]

The baht is just stable and there's no reason for it not to be.

Except the nose-diving economy and the fact they are using currency reserves to prop it up.

No foreign loans for them now though after their status was downgraded last week.

Wonder what the plan will be now? Another border skirmish with Cambodia perhaps?

[Freddie_fly]

Need to quit smoking so much corn silk i think, the pound was way overvalued as a currency anyway for too long. I dont see any reason for the thais to devalue their currency just so you can have more money to spend here. Toyota hurting because of the baht ? too funny. Personally I think it is about in the right spot.

Yes, maybe you should stop smoking it. perhaps a few Google searches or maybe a look at a 'real' financial website would change your outlook.

How you can possibly think that it is in the right spot is beyond me.

some facts for you:

Thailand is one of the highest GDP earners from exports in the world (around 64%). If the Baht is strong those exports cost more. You may have read the news over the last few months and seen that there is a Global economic downturn. The first thing this hits is Higher priced imports. It stands to reason that Thailand's export based economy is extremely fragile in this context.

While Thailand does export lots of clothes/shoes etc, Its biggest foregn currency earners are automobiles, Heavy electrics, Consumer electronics, all of which are not being bought in the same numbers as even 1 year ago.

Toyota is hurting because people all over the world are Not buying new cars, As Thailand produces a huge number of Toyota's for export this will hit the parent companies bottom line.

Britain's export economy is smaller but geared more towards high tech including Pharmaceuticals, chemicals,and industrial electronics. Thus it isn't such a consumer based export market and, as such, has taken much less of an export hit.

I remember when I got a lot less for my Pound over here, for many years. Although as I am now paid in dollars It doesnt affect me as much.

It has been swings and roundabouts for quite a while here, but I think the baht is moving onto the Slide for a while.

regards

Freddie

[jcon]

I think given the current political situation, global economy, and future royal issues, 41 is possible, maybe 44 on a spike down. After that I think it heads to 20THB:1 $USD in the next decade or so.

Double in value against the USD in the next decade? Reason? Too many USDs around at that time? Honest question.

If I could have 20THB:1USD I'd sell all properties/land in Thailand and buy a house in Colorado and stare at a beautiful mountain for the rest of my life... I would still hear the noises of Thailand in my head at night (dogs, motorcycles, chaos), but then I would look out my balcony into the moon-lit snow-capped mountains and smile. Ok, that was my dream quota for today

[chiang mai]

Unless things have changed during the past two weeks since I last looked at the numbers, there is no proof whatsoever that BOT is using currency reserves to prop up THB. On the contrary, foreign reserves continue to grow, despite all logic to the contrary.

The baht is just stable and there's no reason for it not to be.

Except the nose-diving economy and the fact they are using currency reserves to prop it up.

No foreign loans for them now though after their status was downgraded last week.

Wonder what the plan will be now? Another border skirmish with Cambodia perhaps?

[chiang mai]

Clearly not many Brits reading this thread, nobody has picked up on the fact that a 20 Baht US Dollar means a 32 Baht British Pound!

After that I think it heads to 20THB:1 $USD in the next decade or so.

I think this is the key message in this thread and I agree totally, I also think it's also possible that the short term spike downwards that was also mentioned may not happen except for one or two Baht perhaps.

That's entirely possible. The only thing I know for sure is that it needs to test 35.80ish again. Then we'll see if it breaks through and retests it's lows or strengthens instead.

[ChiangMaiFun]

Clearly not many Brits reading this thread, nobody has picked up on the fact that a 20 Baht US Dollar means a 32 Baht British Pound!

This Brit it certainley following it! but I believe the Baht is overvalued and the GBP will improve against it to about 55 maybe better later this year - just read the Posts recent articles on the downturn and the slide in the economy!

After that I think it heads to 20THB:1 $USD in the next decade or so.

I think this is the key message in this thread and I agree totally, I also think it's also possible that the short term spike downwards that was also mentioned may not happen except for one or two Baht perhaps.

That's entirely possible. The only thing I know for sure is that it needs to test 35.80ish again. Then we'll see if it breaks through and retests it's lows or strengthens instead.

[chiang mai]

Indeed there is likely to be a short term improvement against GBP but the longer term picture is for a much stronger Baht I reckon. I think the idea of buying Baht when it peaks this time around and investing it in Thai real estate in due course could prove to be an effective investment strategy over the medium/longer term, from an exchange rate perspective.

[AsiaMB]

Well it would seem to me what with all the political problems at the moment i.e. reds yellows blues etc.The eye is off the ball where the economy is concerned. So time to devalue the Baht say 30% and this should give the economy a needed boost.

This would give the Tourism industry a well needed boost as the thought of a cheaper holiday would sway many away from worrying about the possible dangers of comming here.it would also give exports a well needed boost making exports cheaper from a overseas buyers point of view..

Ok imports would be more expensive but these are not always the average man in the streets purchase anyway.Yes I know fuel would be more expensive but this would surely be outweighed by the positives.

The downturn is hitting Thailand hard and will hit harder in the comming months so surely its better to act now and at least have some forign currency comming in?

Your thoughts TV.

I am surprised Abhisit hasnt started printing more money ! along with all te other great ideas he has..........

[Freddie_fly]

Indeed there is likely to be a short term improvement against GBP but the longer term picture is for a much stronger Baht I reckon. I think the idea of buying Baht when it peaks this time around and investing it in Thai real estate in due course could prove to be an effective investment strategy over the medium/longer term, from an exchange rate perspective.

I dont know where you are getting your data from but it would be interesting if you could enlighten us as to why you think the baht will get "much stronger". I can see no reason with the current economic situation why the baht will do anything but tank.

regards

Freddie

[chiang mai]

Indeed there is likely to be a short term improvement against GBP but the longer term picture is for a much stronger Baht I reckon. I think the idea of buying Baht when it peaks this time around and investing it in Thai real estate in due course could prove to be an effective investment strategy over the medium/longer term, from an exchange rate perspective.

I dont know where you are getting your data from but it would be interesting if you could enlighten us as to why you think the baht will get "much stronger". I can see no reason with the current economic situation why the baht will do anything but tank.

regards

Freddie

Well I'll try. Firstly, there's been huge a amounts of useful commenatary written on TV about the strength/weakness of the Baht versus other currencies and if you are really interested in understanding the issue in detail, it's worth reading through those threads. I'll try however and give you some of the key points and will use GBP as my reference currency since that is the currency I store:

Around twelve years ago Thailand was the catalyst for the Asian financial crisis and that event caused the currency to fall from a long standing 35 Baht per Pound to around 90. Over time the Baht strengthened to the low 70's whilst the Thai government, bailed out by the IMF, began to put its house in order. As I recall the IMF loan was finally repaid in full in the last year of Thaksin's reign. In the years since the Asian financial crisis Thailand has made substantial progress by putting in place a financial infrastructure, under the BOT and the country's fiancial management is now quite highly respected. Evidence of this in part is the very high level of foriegn reserves which at last glance stood at USD 110 billion, far higher than the UK.

One of the negatives of the Asian crisis is that many Westerners have come to expect that the Thai Baht would always be worth around 70 to the Pound (and 40 or so to the US Dollar) and the screams from unwary expats over the past twelve months have been bouncing around TV as the Baht has reached it current 52 Baht per Pound! But looking at the current gloabl economic crisis and to the future, Thai banks do not have any real exposure to the bad debt generated in the US etc and the BOT does not need to undertake quantative easing like the US Fed and the BOE. It therefore follows that all other factors being equal, THB will strengthen against USD and GBP in the comming months and years. But of course that is not all of the picture and I accept that the Thai economy is export driven and exports are currently being hit quite hard. It should be worth noting though that the lement of those exports that is suffering is exports to the West and not exports amongst regional trading partners which accounts as I recall for more than 60% of the total. Whilst on the subject of GDP I don't believe that falls in tourists to Thailand is really an issue since tourism accounts for only around 7% of GDP and is more easily renewed from alternate sources.

So, in the short term, say the next six to twelve months, yes the Baht may will weaken slightly but tank, I really don't think so. Remember, as exports do fall and the ecomomy does suffer, local people in ths country will not be affected the same way as people in say the US, UK or Europe, they will simply return to their villages and not require the same kinds of financial support other countries in the West might provide. Thereafter as the global economy recovers it's likely that Thailand will be well ahead of the pack since they will not have the overhang of central bank borrowings and QE. I think what most people forget on this subject is 35 Baht per Pound was the long standing norm and now we are entering a period where major exchange currencies such as USD and GBP are/will be seriously damaged by comparison.

[tigerboy]

Overall an excellent and informative post, however, I'm going to focus on the statement below...

Thereafter as the global economy recovers it's likely that Thailand will be well ahead of the pack since they will not have the overhang of central bank borrowings and QE.

... because I pretty dang sure that it's been reported that Thailand (would that be the BOT?) is going to get loans from Japan and also China. I reckon that these loans would be repaid with the foreign (USD$) reserves that Thailand has. Unless they "piss them away" propping up the Baht. Time will tell...