Stronger Baht/usd

[Harmonica]

BOT chief satisfied with current baht movement 

BANGKOK: --  Bank of Thailand (BOT)’s Governor M.R. Pridiyathorn Devakula yesterday voiced satisfaction with the ongoing baht movement, saying its value is appropriate under the current economic condition.

He conceded the central bank intervened in the baht movement to ensure its stability when the local currency had rapidly weakened in the past week.

The baht had now begun to stabilize and stayed at a suitable level under the current economic condition, he said

--TNA 2005-06-09

As stated before, no disrespect intended -- only a review of antediluvian (seems like) times ... a man's got to know his own limitations and when he comes up against the abyss for the second time is there really any guarantee that he will get it right this time around (notwithstanding the different texture, poise & latent power of the current looming abyss)?

The 2 paragraphs below are excerpted from ...... http://64.233.183.104/search?q=cache:DGsLG6FXN-UJ:www.pacom.mil/publications/apeu02/02AsiaCrisis5f.doc+BOT+mistake+1997+currency+crisis&hl=en

Financial Crisis Arrives

Pressure started to build on the Bank of Thailand in December 1996 to devalue the baht. Revelations that several of the Thai finance companies were over-exposed to the foreign financed property glut triggered a speculative attack on the baht in early February 1997. By March Bangkok was facing the most serious financial crisis in Thai history. But the truly remarkable aspect of the Thai crisis was the poor response of the Bank of Thailand (BOT). The outcome for Thailand would have been much improved if the bank had simply ignored the crisis and done nothing more than letting the baht float.

In the first two weeks of May 1997, the BOT decided to switch its intervention to defend the baht from spot foreign exchange transactions to forward transactions, buying baht against dollars for value in three months. The BOT chose to ignore the implications for its balance sheet. The BOT was therefore massively exposing itself to the fate of its own currency. Speculators thereby effectively received a subsidy from the bank to take short positions in the baht. Thanks to the BOT, the baht then turned into a one-way bet for short sellers. It would have been practically impossible for the short sellers to accumulate such an enormous short position in the baht had it not been for the sales that the BOT made.

-------------------------

Best of luck to BOT Gov

George, if you have the pull, why not send the Gov. this?

Yen crossed 109 yesterday -- Thai Baht continues to tantalize and woo ......

It soy-tenly isn't stable

Look at the bold move yesterday -- blasting thru' the trendline resistance!

[~G~]

It soy-tenly isn't  stable

Look at the bold move yesterday -- blasting thru' the trendline resistance!

<{POST_SNAPBACK}>

I agree with Harmonica. This is as stable as an avalanche. BOT wake up!

[thedude]

A bit off topic Harmonica but i recall a discussion some time ago on the relationship between foreign buying and SET direction. We agreed foreign buying had a strong influence on the SET. You further elaborated on the relationship between the Baht and the SET. I noticed however that recently the movement of the SET was running against the trend with net foreign buying even though the Baht continues to weaken, any thoughts on this?

[~G~]

The weakening would contribute to an increase in exports

increase in exports? but how will you manufacture your products? with what electricity? How will you acquire the raw materials? How will you transfer them, land, sea and air?

weak baht + higher diesel prices =

imported items too expensive. whole economy weakens. evantually exports go down as well.

[samran]

The weakening would contribute to an increase in exports

increase in exports? but how will you manufacture your products? with what electricity? How will you acquire the raw materials? How will you transfer them, land, sea and air?

weak baht + higher diesel prices =

imported items too expensive. whole economy weakens. evantually exports go down as well.

<{POST_SNAPBACK}>

That would depend what proportion of inputs are transport related G.

I'm not a supply chain analyst, but I'd suggest that if transport costs were only a small part of the supply chain, other things being equal, a weaker baht would be good for exports.

Edited June 16, 2005 by samran

[samran]

Also, does anyone know were I can get up to date forward rates for Baht?

cheers

samran.

[Maka]

The weakening would contribute to an increase in exports

increase in exports? but how will you manufacture your products? with what electricity? How will you acquire the raw materials? How will you transfer them, land, sea and air?

weak baht + higher diesel prices =

imported items too expensive. whole economy weakens. evantually exports go down as well.

<{POST_SNAPBACK}>

Low valued Baht = lower cost

High valued foriegn corrency= higher income

lower cost+ higher income = greater profits

not rocket science

Devalued Baht= exporters dream come true

(a good exporter has/is anicipated this and has alredy factord it)

[TokyoT]

The weak Baht – good for exports is not so clear cut. Will depend on if you can obtain your raw materials locally or have to import materials to make your end product –as Thailand is not really a broad band resource rich nation and therefore many areas depend upon imported raw materials.

[Harmonica]

Thai Baht hit 41 within minutes of Maka's post. Same thing happened @ 40.

If it happens again @ 42 I'm going to sound the "conspiracy" alarm.

[Harmonica]

A bit off topic Harmonica but i recall a discussion some time ago on the relationship between foreign buying and SET direction.  We agreed foreign buying had a strong influence on the SET.  You further elaborated on the relationship between the Baht and the SET. I noticed however that recently the movement of the SET was running against the trend with net foreign buying even though the Baht continues to weaken, any thoughts on this?

Oh yes, its an excellent observation.

We had established that foreign buying lifts the SET -- and this is happening currently. So this is nothing new. No explanation needed here. No disagreement.

Done!

However, when we speak about the Baht and SET -- there have been only 2 times in history where they diverged -- for several weeks in one instance.

You have noticed this divergence transpiring right now (and correctly so I might add) and it is a 7-trading day oddity thus far.

The divergence started on May 26.

Actually the pattern of Baht and SET movement during these last 2 months has been a bit odd -- still correlated very positively, but some excessive dips in SET when Baht was flat have caught my attention and I am pondering this currently.

I have some ideas as to a possible why but have no degree of confidence just yet and will have to let the market play its hand for days or weeks before I can explain this current anomaly satisfactorily.

By my analysis the SET Index is in a wave 2 rally in accordance with world markets, especially the Nasdaq. Where & when it will end I cannot say just yet but when it does conclude we are going to hurtle towards 500 at breakneck speed.

It goes without saying that I am NOT in the SET this time, despite this current rally!

When we are on the cusp of wave 3 down (about to start when this rally terminates) it is indeed dangerous to play with fate. One bomb in Phuket during the wee hours could cause the market to open 30 points down (a likely occurrence during wave 3) and I don't want to get caught in the stampede. I usually leave when NOBODY wants to leave and I always wash my hands at the exit and get a cold beer!

Fasten seatbelts !

[~G~]

Low valued Baht = lower cost

High valued foriegn corrency= higher income

lower cost+ higher income = greater profits

not rocket science

Devalued  Baht= exporters dream come true

(a good exporter has/is  anicipated this and has alredy factord it)

<{POST_SNAPBACK}>

Is it so?

Take agriculture for example.

Labour stays the same, right? meaning cheaper in relation to the increased bahts/dollar.

But what about the other expenses?

* PVC pipes - imported, plus they are a product of oil

* Machinary - tractors, pumps, vehicles - mostly imported

* Fertilizers and insecticides - mostly imported

* Transport - daily + overseas shipping... $$$ + Oil Oil Oil

The inputs are more *expensive*. The farmer pays for most of these products long before he sees one baht of profit. Finance is not easy to get. With these higher costs he can't even set up his field.

Result - Production goes down. Exports go down.

Not rocket science indeed...

[~G~]

And by the way, only 17% of Thailand's exports go to the US. (2004)

If the $ is high in relation to global basket (not only in relation to the baht) it means that 83% of the exports go to countries that cannot, and will not, pay the same prices in $.

Now tell me if overall exports go up or down.

Edited June 17, 2005 by ~G~

[Maka]

Low valued Baht = lower cost

High valued foriegn corrency= higher income

lower cost+ higher income = greater profits

not rocket science

Devalued  Baht= exporters dream come true

(a good exporter has/is  anicipated this and has alredy factord it)

<{POST_SNAPBACK}>

Is it so?

Take agriculture for example.

Labour stays the same, right? meaning cheaper in relation to the increased bahts/dollar.

But what about the other expenses?

* PVC pipes - imported, plus they are a product of oil

* Machinary - tractors, pumps, vehicles - mostly imported

* Fertilizers and insecticides - mostly imported

* Transport - daily + overseas shipping... $$$ + Oil Oil Oil

The inputs are more *expensive*. The farmer pays for most of these products long before he sees one baht of profit. Finance is not easy to get. With these higher costs he can't even set up his field.

Result - Production goes down. Exports go down.

Not rocket science indeed...

<{POST_SNAPBACK}>

You are talking about production...a different topic.

But even if you are correct and production drops ...in any comodity

That does not mean that exports of that comodity will decrease.

The producer will sell to the highest bidder

If that high bidder hapens to be an exporter (who is now making higher profits ) then the exporter has as much product to export as he needs!!

If production is down other customers will fall by the wayside

NOT the exporter.

[Maka]

Thai Baht hit 41 within minutes of Maka's post.  Same thing happened @ 40.

If it happens again @ 42 I'm going to sound the "conspiracy" alarm.

<{POST_SNAPBACK}>

Please sound all conspiracy (and other alarms ) to the CM D.B.C.

(Draw Bridge Comitee).

Go Baht Go

[Maka]

The weak Baht – good for exports is not so clear cut.  Will depend on if you can obtain your raw materials locally or have to import materials to make your end product –as Thailand is not really a broad band resource rich nation and therefore many areas depend upon imported raw materials.

<{POST_SNAPBACK}>

You make a valid point.

This scenario only works where all the value added is from labor.

However I do believe that very few exported comodities from Thailand do or will fall into this catagory. Labor only contracts can/are outscourced to countries with lower labor costs than Thailand.

Everything we export, or even consider for export is all Thai. Raw materials, labor, packaging, handeling.....everything. Good for Thailand, the people we buy from, thier supliers, our customers, and us. Everybody wins.

The farther the Baht drops against foriegn currencies the more we export, the more we buy here in Thailand.

1+1=2

[~G~]

Maka, surely, when baht weakens, in the short term - exporters will make a greater profit.

But - only up to a certain point. When production become more expensive, producers will increase the prices to cover costs and keep their margin. And exporters will have to pay these prices. Consumption in the local market will go down, causing further slow down in the economy.

Exports may be high compared to imports, but if the baht really dives, in real figures both import and export will finally decline.

Everything we export, or even consider for export is all Thai. Raw materials, labor, packaging, handeling.....everything. Good for Thailand, the people we buy from, thier supliers, our customers, and us. Everybody wins.

That is simply incorrect. 75% of Thai exports come from manufacturing, heavily dependent on raw materials. mostly computer parts, electronic circuits, vehicles and garments.

All Thai? No such thing. Even rice requires fertilizers (imported chemicals), harvesting (imported machinary), milling and processing (machinary+energy+transport), and then, packaging (raw material for the PP-woven bags does not come from here). Not to mention international shipment, VERY significant when you need to compete with closer countries, especially with a cheap product like rice, in which the transportation is a big % of the overall cost.

The farther the Baht drops against foriegn currencies the more we export, the more we buy here in Thailand.

By this logic, the poorest countries in the world should be the biggest, strongest exporters. African countries should be top exporters. Unfortunately it isn't so.

In 2003, the industrial countries Exported products worth 4,561,700 Million $

The developing countries, with weaker currencies? only 2,839,000 Million $.

How come? No strong production => no export.

Edited June 18, 2005 by ~G~

[expatinasia]

Barely 3 months ago, when the dollar sank to <39 baht per, the Thai Finance Minister couldn't contain his glee. "Thailand will not interfere with the sinking USD - there won't be any support...the USD will sink to 35baht per in 90 days..." Does this character still have a job?

[Heng]

Maka, surely, when baht weakens, in the short term - exporters will make a greater profit.

But - only up to a certain point. When production become more expensive, producers will increase the prices to cover costs and keep their margin. And exporters will have to pay these prices. Consumption in the local market will go down, causing further slow down in the economy.

Exports may be high compared to imports, but if the baht really dives, in real figures both import and export will finally decline.

Everything we export, or even consider for export is all Thai. Raw materials, labor, packaging, handeling.....everything. Good for Thailand, the people we buy from, thier supliers, our customers, and us. Everybody wins.

That is simply incorrect. 75% of Thai exports come from manufacturing, heavily dependent on raw materials. mostly computer parts, electronic circuits, vehicles and garments.

All Thai? No such thing. Even rice requires fertilizers (imported chemicals), harvesting (imported machinary), milling and processing (machinary+energy+transport), and then, packaging (raw material for the PP-woven bags does not come from here). Not to mention international shipment, VERY significant when you need to compete with closer countries, especially with a cheap product like rice, in which the transportation is a big % of the overall cost.

The farther the Baht drops against foriegn currencies the more we export, the more we buy here in Thailand.

By this logic, the poorest countries in the world should be the biggest, strongest exporters. African countries should be top exporters. Unfortunately it isn't so.

In 2003, the industrial countries Exported products worth 4,561,700 Million $

The developing countries, with weaker currencies? only 2,839,000 Million $.

How come? No strong production => no export.

Not generalizing for all local exporters... but we loved the Baht at 25, loved it even more at 27, 35, 45, etc. Healthy returns and growth every single year since 97. There's a lot of margin for error built into the local economy because of that local ability to live on next to nothing while still retaining a positive outlook on life.

[Harmonica]

Thai Baht hit 41 within minutes of Maka's post.  Same thing happened @ 40.

If it happens again @ 42 I'm going to sound the "conspiracy" alarm.

Please sound all conspiracy (and other alarms ) to the CM D.B.C.

(Draw Bridge Comitee).

Go Baht Go

Don't mind filling out forms etc. but do you know if that fellow Ajarn chairs this Chiang Mai D.B.C? If he does, I'm sh*t out of luck and wonder if I'll even be able to make it back home thru' the gates?

Perhaps I could get him some oranges from Mai Sai?

[Harmonica]

Thai Baht hit 41 within minutes of Maka's post.  Same thing happened @ 40.

If it happens again @ 42 I'm going to sound the "conspiracy" alarm.

Please sound all conspiracy (and other alarms ) to the CM D.B.C.

(Draw Bridge Comitee).

Go Baht Go

Maka,

Head on over to the "US Dollar came to the gunfight with a knife" thread and read my comments on Warren Buffet, the greatest enemy (other than the euro) of the dollar and hence our enemy w.r.t trend of the Baht.

His bet of 21 billion dollars against the US Dollar is still growing weekly!

[george]

Thai baht expected to slide to Bt41.20-41.30 a US dollar

BANGKOK: -- The Thai baht has continued to depreciated against the US dollar over the past week, and is expected to slide to Bt41.20-41.30 a US dollar this week, according to financial analysts.

The Thai currency weakened to Bt41.17 against the greenback late last week, the weakest level in eight months.

This was due to investors' confidence in the US economy after the country's economic figures, including its trade deficit in April announced recently, were better than expected and an upward trend of US key interest rates, said the financial analysts.

The movement of the Thai currency has, however, been in line with other key currencies in the region, including the Japanese yen and the euro.

The baht movement has also been closely monitored by the Bank of Thailand (BOT), according to the BOT's Assistant Governor, Miss Nitaya Pibulratanagit.

It was anticipated that the Thai baht would continue to weaken against the US dollar this week, possibly sliding to Bt41.20-41.30 a US dollar, said the analysts.

--TNA 2005-06-20

[thedude]

thanks Harmonica for the earlier reply wrt SET direction. the SET has lost several points today, this may be the start of the downward spiral. i've lowered the lifeboats, but still hesitating to jump ship and take losses.

btw, how will your contrarian position hold in light of the now mass market expectation of a continued strengthening of the dollar as evidenced by numerous press reports?

[Harmonica]

For maka,

Refer to the chart below. The horizontal dashed red lines are resistances that Baht has rocketed past. The one at the top of the chart @ 41.68 is the next hurdle. See the thick dark grey downloping line across the chart from left to right? That took considerable energy to overcome, but it certainly has been vanquished.

Baht has consumed much energy thus far and has done very well considering that this entire run since december might turn out to be just one of 3 upward motive waves. Waves 3 and 5, if my analysis proves correct, are much more powerful and will take her forcefully towards 50.

But let's slow things down a bit to ponder what might happen in the near future, the near-term?

See the thick orange line, upsloping to the right of the chart? Baht is resting on this line and has pretty much telegraphed me that this is her near-term uptrendline. When/if this line breaks we will have a correction!

In the lower window, the drooping momentum to the extreme right is suggesting that Baht will break this trendline and correct soon -- but until this actually happens, it is not adviseable to jump the gun.

The paragraph above is also intended for "thedude" -- the thread originator. In response to his question about getting into the SET (or getting out) -- my evaluation reveals that there should be yet another rally to approx. 700-730 and for supreme confidence in such a rally, Baht must accomodate it and correct downwards (=strengthen).

Only if Baht breaks this uptrendline will I have any degree of confidence in such an upcoming SET index rally, for if it does occur we will see some sparkling volume instead of the feeble stuff we've seen for wave A of the rally thus far.

Let's continue to observe over the next several days and see what she does!

Regards

[Harmonica]

thanks Harmonica for the earlier reply wrt SET direction.  the SET has lost several points today, this may be the start of the downward spiral.  i've lowered the lifeboats, but still hesitating to jump ship and take losses.

btw, how will your contrarian position hold in light of the now mass market expectation of a continued strengthening of the dollar as evidenced by numerous press reports?

dude, kindly refer to my response to Maka for my opinion of the SET rally!

As for the $, this is only wave 1 of its ascent and during this portion only a minority will have noticed. Then during the 2nd wave corretion these same cats will say, "see, I told you so, its a fake rally; now $ will go back to the basement and probably perish!"

But just as they become smug as bugs, wave 3 up will start and their rear ends will twitch, holler and pucker up in agony (some with ecstasy! ). During the second phase of wave 3, realiziation and recognition of their folly will silence these pricks for good and their losses will mount.

When Warren Buffet throws in the towel, the Dollar will reverse and send him to his grave!

[thedude]

Harmonica, thanks. There was a big rally yesterday and as of lunch time today its sitting on 690! I have a couple of really good tips and if your willing to play you can pm me.

[Maka]

For maka,

Refer to the chart below.  The horizontal dashed red lines are resistances that Baht has rocketed past.  The one at the top of the chart @ 41.68 is the next hurdle.  See the thick dark grey downloping line across the chart from left to right?  That took considerable energy to overcome, but it certainly has been vanquished.

Baht has consumed much energy thus far and has done very well considering that this entire run since december might turn out to be just one of 3 upward motive waves.  Waves 3 and 5, if my analysis proves correct,  are much more powerful and will take her forcefully towards 50.

But let's slow things down a bit to ponder what might happen in the near future, the near-term?

See the thick orange line, upsloping to the right of the chart?  Baht is resting on this line and has pretty much telegraphed me that this is her near-term uptrendline.  When/if this line breaks we will have a correction!

In the lower window, the drooping momentum to the extreme right is suggesting that Baht will break this trendline and correct soon -- but until this actually happens, it is not adviseable to jump the gun.

The paragraph above is also intended for "thedude" -- the thread originator.  In response to his question about getting into the SET (or getting out) -- my evaluation reveals that there should be yet another rally to approx. 700-730 and for supreme confidence in such a rally, Baht must accomodate it and correct downwards (=strengthen).

Only if Baht breaks this uptrendline will I have any degree of confidence in such an upcoming SET index rally, for if it does occur we will see some sparkling volume instead of the feeble stuff we've seen for wave A of the rally thus far.

Let's continue to observe over the next several days and see what she does!

Regards

<{POST_SNAPBACK}>

I do love these charts

Looking at the force and momentum upwards along the orange line, since mid May, it apears that the Baht will cross the next line of resistance (41.6+ to 41.7 ) in the next 6 or 7 days.

The probablility of that happening is compounded by the aparent fact the the BOT is going to refrain from any further attemps at intervention.

Im taking your advice :

"Let's continue to observe over the next several days and see what she does!"

[Harmonica]

Harmonica, thanks.  There was a big rally yesterday and as of lunch time today its sitting on 690!  I have a couple of really good tips and if your willing to play you can pm me.

You're welcome, dude. Yeah I am well aware of that big rally and am also quite pleased that you are making money and doing well!

I'm staying out for now.

[quiggs]

The US is also a world leader in rice production

The total world export market for rice stood at 27 million tons in 2002. Thailand (7.34 million tons) is the largest exporter of rice, followed by India (5.05 million tons), USA (3.27 million tons) and Vietnam (3.24 million tons). Pakistan is the worlds 5th largest exporter of rice, with total exports of 1.68 million tons in 2002.

Which is worse, a racing in debt economy or one that runs on how much it can steal.  USofA has problems but at least our economy is based on a solid foundation of homes and goods and not on something as ethereal as tourists and how many can the country clip when they come to visit. face it the US is the biggest bully on the street, if you don't like that get off the street!  Everybody loves to hate the US but everybody wants to go there including all you Thais out there.

<{POST_SNAPBACK}>

Thailand is the biggest exporter in the world of Rice and Pineapple and top exporter of Chicken, Shrimp, Rubber and many other agriculture goods. Its not all tourism as you depict it. And there's nothing wrong with earning from tourism as well.

Everybody wants to go there? Let me just not comment on that.

Edit - removed elaborated explanation of why not to go to the US.

<{POST_SNAPBACK}>

[Maka]

Miss Baht is movin prety slowly

1.00 USD

United States Dollars = 41.3320 THB

1.00 USD

United States Dollars = 41.3442 THB

Thinkin' maybe the BOT isnt exactly implementing their "hands off" policy as they claimed.

Perhaps that is because the Baht hasnt stabalized as they claimed?

[TRIPxCORE]

I havent been reading this thread since it's inception but the feeling I get is that many of you feel the USD is going to rally and get stronger? If you think that, I have some swamp land in Florida I want to sell. Simple fact of the matter is that the US is running two huge twin deficits that are simply unsustainable and eventually the USD will have to depreciate. Asian currencies should have a nice run up when this happens along with the Euro. To enlighten the situation, from my currency newsletter:

Japanese yen continues to be affected by poor data, which is really strange, given the fact that when Japan was chalking up great numbers last year, yen wasn't rewarded... Take this recent data for example... On Tuesday, Japanese Retail Sales for May rose 2.7%, and yen saw little comfort in that data... Last night, Japanese Industrial Production fell 2.3% in May, and the yen got taken to the woodshed! I saw this quote yesterday while searching the news stories... "With yen dropping so low, it offers people the chance to get back in and buy the yen" spoken by Toshi Honda, a currency strategist at Mizuho Corporate Bank, Ltd.... I was talking to our resident investment guru, Joe Losos, yesterday about yen, and I said, "Joe... It looks as though the market wants to take yen back over 110." And Joe said... "I think you're right, and when they do, I want to buy!" Well, Joe, I would love to say it ain't so Joe... But, the markets have taken yen back over the 110 figure... So, just let me know how much you want to buy!

One currency that remains well bid is the Canadian dollar, or loonie, as I prefer to call it... Yesterday, the Bank of Canada's Gov. Dodge gave the May Monetary Policy Review, and had some glowing things to say about the Canadian economy... He also left the door open for rate hikes this year... I'm of the opinion that Canadian interest rates will be at least 50 BPS higher by year end... Commodity prices will see to that!

There was something else though that Mr. Dodge spoke of that I found very interesting, but didn't even get second billing... Here goes... Dodge stressed the point that the global imbalances are not sustainable over the long run and encourage protectionism. You and I know he was directing this at the US current account deficit against Asian and European current account surpluses and the US overspending. The risk, according to Mr. Dodge, is that when they do adjust, the do so rapidly and recklessly. Of course this is what I've been preaching about for years now... It looks like Gov. Dodge gets about as much reaction from the markets as I do! UGH!

Just to make sure that you hear this stuff from someone other than me... Brian Hicks from U.S. Global Investors said yesterday... "The dollar will continue to weaken and gold will advance in the next couple of years because of the combined effects of the twin deficits."

OK, as I talked about above, U.S. Consumer Confidence soared this month to 105.8... I'm so confused on this... I thought that stocks had not been great lately... Bond yields continued to fall, we continue to spend more than we make, that the Current Account Deficit is spiraling out of control, and that we are still fighting a war... Doesn't sound like anything to be cocky about does it? I don't think so... But then again, they don't ask me my opinion in that survey!

Today, we'll see the final revision for 1st QTR GDP here in the U.S. It is expected to rise to 3.7%, from the previous revision of 3.5%... Of course, once the dust settles on that number, we will probably see that government spending on defense was the main ingredient in the number... So... Make sure that you don't become a part of a Main Ingredient song and buy into the "strong economy" story... "Everybody Plays The Fool" Go on, sing it, you know it... Everybody plays the fool... Sometimes... There's no exception to the rule"...