Gbp Sterling

[oldmanofphuket]

I know I said we shouldn't post quotes but the following article in the Telegraph caught my eye and is relevant:

"depreciation is precisely what a country like the UK needs to rebalance and recover. Indeed, as Goldman Sachs economist Ben Broadbent has pointed out, this is exactly what happened in the early 1990s. It seems likely that such a scenario helps explain why the Bank, and its Governor Mervyn King, appear so keen to see sterling drop further. Indeed, there may be an extra push in that direction from today's Bank minutes".

I thought it was appropriate to post it here because you said that you think GBP and USD are at fair value - I reckon however that GBP has further to fall and apparently others do also. Most pundits reckon that GBP will see parity with the Euro and with USD determinedly bearish, that's not good for GBP/THB. After all, if we can get a handle on GBP/USD then the answers on a probable level of GBP/THB is easy.

It has depreciated quite a bit already. But another 5% is possible on average I'd hazard a guess it might happen. But when we look at the Euro and Baht, hasn't it fallen more than 20% ?. And of course against the dollar, shouldn't it have remained much the same after all US is in exactly the same position.

If you look at the Effective exchange rate which measures a currency's exchange rate against a basket of currencies the baht has been pretty steady over the last 2 years. Weird eh?

[cloudhopper]

Expert commentary here

[chiang mai]

Expert commentary here

Brilliant, I laughed until I cried, very very good.

Edited September 25, 2009 by chiang mai

[chiang mai]

I know I said we shouldn't post quotes but the following article in the Telegraph caught my eye and is relevant:

"depreciation is precisely what a country like the UK needs to rebalance and recover. Indeed, as Goldman Sachs economist Ben Broadbent has pointed out, this is exactly what happened in the early 1990s. It seems likely that such a scenario helps explain why the Bank, and its Governor Mervyn King, appear so keen to see sterling drop further. Indeed, there may be an extra push in that direction from today's Bank minutes".

I thought it was appropriate to post it here because you said that you think GBP and USD are at fair value - I reckon however that GBP has further to fall and apparently others do also. Most pundits reckon that GBP will see parity with the Euro and with USD determinedly bearish, that's not good for GBP/THB. After all, if we can get a handle on GBP/USD then the answers on a probable level of GBP/THB is easy.

It has depreciated quite a bit already. But another 5% is possible on average I'd hazard a guess it might happen. But when we look at the Euro and Baht, hasn't it fallen more than 20% ?. And of course against the dollar, shouldn't it have remained much the same after all US is in exactly the same position.

But surely when making comparisons against other economies such as the US, it's a question of the comparative size of the debt, the comparative size of the economy and the capability for that economy to recover, i.e what does it have to offer to the recovery process. If you make that comparison (UK vs US) it shows there is no comparison so no, it shouldn't have remained the same.

The other point is that whilst the figure of 20% is used as a guideline it is not a precise figure that is true of all currencies - yes, against THB the fall has been greater than 20% but against others it has been less.

[theoldgit]

All I know is that my pension gets me 25% less Baht to my Pounds than it did when I moved to Thailand two years ago.

[wordchild]

One could argue that from a long term perspective Asian currencies are still recovering from the trashing they got in the crisis in 1998. In the early 1980,s the baht was fixed against the dollar at a rate of around 23 it was allowed to free-float (and devalue) in 1984 ,but from then on to the start of the Asian crisis in 1997 it moved in a very stable range between 25 and 27.

It was probably this stability and the resultant high level of dollar borrowing that Thai businesses engaged in that led to the crisis and the collapse of the baht which reached 56 (i think intra day it touched 59) in Jan 1998. The baht re-bounded quite strongly as the tough IMF medicine led to massive corporate and debt restructuring ,recovering to 35 by 1999.

However the recovery of the US economy post 2001 pulled funds back to the dollar and the baht traded back to the 40-45 range through the period to 2006.

Since the start of 2006 there has been a clear trend of the baht (and all other Asian currencies) strengthening against the dollar. There was a bit of a reversal of this trend as the world was thought to be in financial meltdown during 2008 and the dollar benefited from a "flight to quality". But, as it has become clear that the world is not ending ,that trend of dollar weakness and baht strength has continued.

There are good fundamental reasons for this, as one famous fund manager said on CNBC recently "Asia is where the money is now". Unlike the US and UK, Thailand is not a significant net borrower anymore. The Thai govt/central bank would rather the baht were not so strong,Thailand regards itself as first and foremost an exporter, and, to the extent that there has been any manipulation, it has been to try to hold the baht down. While the "Thailand as an Asian Tiger" growth story of the 1990,s is no longer tenable ,in many other ways the economic fundamentals of the country are better than they were then and certainly relative to the US economy now and then.

FWIW I would not be surprised to see the baht back at 25 to the dollar at some point over the next year or so. What the pound does against the baht would be just the residual of that. For some perspective, prior to the 97/98 crisis the baht was around 40 to the pound.

Edited September 25, 2009 by wordchild

[chiang mai]

The residual of that is 35 baht per Pound and I agree entirely.

[Chaimai]

All I know is that my pension gets me 25% less Baht to my Pounds than it did when I moved to Thailand two years ago.

Interesting that no one takes the view that they had a 25% bonus for a period of time

70 Baht to the Pound was never sustainable.

[chiang mai]

Again, agreed, but it's now a question of the size of that bonus, was it 25% or was it nearer 50%!

[mommysboy]

Again, agreed, but it's now a question of the size of that bonus, was it 25% or was it nearer 50%!

As discussed previously there is not a reliable body of information to say what the normal rate is, as the bt was fixed at an insanely high valuation for many years, and that could be beginning to happen again now. Without a doubt 75bt was equally crazy.

Certainly the pound is on the slide again. My guess is 50bt is a real possibility on the back of an orchestrated drop in value of pound by BOE, and an overly strong bt.

Quite what effect the strong bt (against dollar) is going to have for Thailand I don't know, but my guess is a disasterous one- watch export figures with interest.

[12DrinkMore]

Here we go again

http://www.telegraph.co.uk/finance/economi...ainst-euro.html

Sterling dropped by 1.9pc against a basket of other currencies – the biggest one-day fall since the aftermath of the Bank's decision in March to cut interest rates to just above zero and embark on an unprecedented series of asset purchases. It took the pound to its weakest level against the euro, which rose to a level of 91.53p, and sparked more predictions that sterling will soon hit parity against the single currency.

Labour always manage to end with the country's finances in a huge mess and a GBP crisis. When will the UK taxpayer realise this, or are they are really a bunch of dumbed down morons?

Wonder if Brown will be with his begging bowl at the doors of the IMF? He certainly won't be making the decisions

http://www.telegraph.co.uk/finance/finance...m-US-plans.html

Britian's role in the International Monetary Fund is under threat as the US lobbies for an extended role of the global body.

Obamah surely realises that brown is a loser and a shrinking blob on the political landscape.

Mr Brown was apparently able to snatch some private "face time" with Mr Obama only in a kitchen during a dinner with other leaders in New York.

His comments came amid reports that the White House rejected five separate requests for a bilateral meeting during the four days Mr Brown is in the US for the UN and the G20 summit in Pittsburgh.

Parity with the EUR, well down Bully Boy Brown. As he said himself, " a weak currency is a sign etc etc", Brown is the weakest.

[whichschool]

Agree with you both.

The biggest fault the UK made was not to join the EURO in 2002.

But that would have meant even lower interest rates and would have inflated the UK housing bubble which is behind this demise even further.

Besides if the UK wishes to get back into manufacturing a low currency for a sustained period of time is a good thing.

1.62 v the dollar is close to the long term average.

[loverboy44]

Why would that have meant lower interest rates?

The housing bubble didn't come out from low interest rates but from mortgages that were given too easily!

That inflated the house prices artificially.

[12DrinkMore]

Quite what effect the strong bt (against dollar) is going to have for Thailand I don't know, but my guess is a disasterous one- watch export figures with interest.

Meandering a bit off topic here, but it's all interrelated, I suppose.

Check out the exchange rates back in the good old days. Here's a place to go back in time (oh, and try to find something like this on any UK bank's website. The UK - finance centre of the world, WRONG, backward and restrictive banking system more like)

http://www.scb.co.th/scb_api/history_exchange.jsp

I've taken 25th September for comparison.

2006 2007 2009

USD 37.55 34.12 33.51

EUR 48.10 47.90 49.09

AUD 28.43 29.34 28.96

NZD 25.32 24.99 23.99

GBP 71.62 68.46 53.49

JPY 32.39 29.62 36.74

So what can you see?

Except for the USD and the miserable GBP, other major currencies are now back to where they started from.

Maybe finally we are seeing the true state of the economies being reflected in the exchange rates? The UK economy was always the weakest, being based solely on a debt boom. The US was the same, but with the de facto reserve currency there will always be support for the USD.

The whole business of currencies and international trading is very complex, but surely, leaving the wreckage of the GBP out of the equation, for other countries it is now just as cheap/expensive to buy from Thailand if exchanging their own currencies directly for THB as it was two years ago?

And if the trade is in USD, then it is EVEN CHEAPER, as the USD has lost value.

The comparison on how it affects exports against direct competitors has to be viewed against the currency exchange rates and prices. The THB exchange rate has not been fluctuating too much against the basket of currencies that Tarisa uses. So if, for example, the price of Thai rice is more than the competitors, then Thailand has to look at the efficiency of the production and transport. And also maybe analyse exactly where the costs are, I suspect in this case the rice cartels are making a lot of money and the rice farmers not very much.

But back to the GBP, this is destined to be in the doldrums until Brown is out and the interest rate is increased, making it more attractive as a currency. At the moment the GBP is acting more as a source of cheap money, the interest rates, historically relatively high, are now at the lowest since the Bank of England has existed. So GBP's are being borrowed cheaply and then be deposited in AUD or even EUR at a greater rate.

There are at least five factors weighing down the GBP.

1. Exceptionally low interest rates

2. Noises from King that QE and the stimulus policies will be continued

3. Similar noises from Brown

4. The parlous state of the UK economy with no real solution or green shoots in sight

5. The currency speculators now have, once again, parity to the EUR in their sights. The herd will surely take it there.

Just my thoughts, for what their worth. Possibly no more than a bottle of Chang :D

[12DrinkMore]

Why would that have meant lower interest rates?

Because the EUR had lower interest rates than the GBP, and setting the rate would no longer be in the hands of Mervyn King.

But yes,

The housing bubble didn't come out from low interest rates but from mortgages that were given too easily!

That inflated the house prices artificially.

that was indeed the problem, the whole of the UK was sitting on the sofa thinking they had reached some sort of financial Nirvana, as they could earn more and enjoy a better lifestyle by speculating in real estate than actually working at a real job.

This lifestyle was promoted by the press, TV, radio, neighbours, estate agents, building societies and banks; who whipped up a few years of utterly excessive exuberance. Cars, kitchens, holidays, lcd TVs and villas in Spain were all financed on the back of rising house prices. Well, that back is now broken, and Brown's attempt to splint it is not working.

As other countries are now looking to put in exit policies to reduce the after effects of all the stimulus, guess who is calling from the corner? Yep, its Brown, pleading for the whole world to rally around and buy UK products, whatever they are, using their stimulus money.

Hah, the man is but a loser and a fool. And the UK population even more so for voting in the Labour party.

Edited September 25, 2009 by 12DrinkMore

[mommysboy]

Quite what effect the strong bt (against dollar) is going to have for Thailand I don't know, but my guess is a disasterous one- watch export figures with interest.

Meandering a bit off topic here, but it's all interrelated, I suppose.

Check out the exchange rates back in the good old days. Here's a place to go back in time (oh, and try to find something like this on any UK bank's website. The UK - finance centre of the world, WRONG, backward and restrictive banking system more like)

http://www.scb.co.th/scb_api/history_exchange.jsp

I've taken 25th September for comparison.

2006 2007 2009

USD 37.55 34.12 33.51

EUR 48.10 47.90 49.09

AUD 28.43 29.34 28.96

NZD 25.32 24.99 23.99

GBP 71.62 68.46 53.49

JPY 32.39 29.62 36.74

So what can you see?

Except for the USD and the miserable GBP, other major currencies are now back to where they started from.

Maybe finally we are seeing the true state of the economies being reflected in the exchange rates? The UK economy was always the weakest, being based solely on a debt boom. The US was the same, but with the de facto reserve currency there will always be support for the USD.

The whole business of currencies and international trading is very complex, but surely, leaving the wreckage of the GBP out of the equation, for other countries it is now just as cheap/expensive to buy from Thailand if exchanging their own currencies directly for THB as it was two years ago?

And if the trade is in USD, then it is EVEN CHEAPER, as the USD has lost value.

The comparison on how it affects exports against direct competitors has to be viewed against the currency exchange rates and prices. The THB exchange rate has not been fluctuating too much against the basket of currencies that Tarisa uses. So if, for example, the price of Thai rice is more than the competitors, then Thailand has to look at the efficiency of the production and transport. And also maybe analyse exactly where the costs are, I suspect in this case the rice cartels are making a lot of money and the rice farmers not very much.

But back to the GBP, this is destined to be in the doldrums until Brown is out and the interest rate is increased, making it more attractive as a currency. At the moment the GBP is acting more as a source of cheap money, the interest rates, historically relatively high, are now at the lowest since the Bank of England has existed. So GBP's are being borrowed cheaply and then be deposited in AUD or even EUR at a greater rate.

There are at least five factors weighing down the GBP.

1. Exceptionally low interest rates

2. Noises from King that QE and the stimulus policies will be continued

3. Similar noises from Brown

4. The parlous state of the UK economy with no real solution or green shoots in sight

5. The currency speculators now have, once again, parity to the EUR in their sights. The herd will surely take it there.

Just my thoughts, for what their worth. Possibly no more than a bottle of Chang

A very good posting indeed and the table of comparisons is simple and very effective.

In all honesty the arguments you present are quite bleak and politically tainted IMHO. Couldn't we just put quantitative easing down as the main factor here and leave it at that? Not that the UK economy is not in a state, but then again aren't they all? To argue differently would be an argument of small differences*

Ironically, UK is in a position for a very strong recovery, done the hard way, but real this time. The pound is low and must remain so, there simply can't be a lending fuelled boom, and public spending will have to be substantially reduced. With plenty of cheap skilled labour UK could boom, although unfortunately the populace may suffer quite badly, same us expats.

But that still leaves the question, is the Thai bt overvalued (in toto) ?. Remember before the world economic fog descended on Thailand, it had a fog of it's own, and I wonder whether this is not the case still ? Public debt is set to soar too. With the bt growing ever stronger against the dollar I can see no end to the export slump soon.

Hence I'm going for a range of 48bt - 56bt to the pound in the short term, I see where we are now as fair value , with a substantial weakening of the bt medium term taking that range to 54bt -62bt medium term. There is a fair chance now that the bt will collapse long term as the economy is trading on empty IMHO.

* a lovely phrase attributed mainly to Freud. As an example, 2 people on the back seat of a bus might comfort themselves with the thought that as they head over the cliff, those in the front seats are in more immediate trouble.

[chiang mai]

"I'm going for a range of 48bt - 56bt to the pound in the short term".

You're a laugh a minute MB but know that you are loved regardless.

[12DrinkMore]

In all honesty the arguments you present are quite bleak and politically tainted IMHO. Couldn't we just put quantitative easing down as the main factor here and leave it at that? Not that the UK economy is not in a state, but then again aren't they all? To argue differently would be an argument of small differences*

Actually no, the UK is probably the worst off, apart from outriders such as Iceland. Britain went into the recession with massive public and private debts and has not really come out of the recession, and has vastly bigger debts. I can't see where it is well position at all. Brown still has six months or so to complete his scorched earth policy as he desperately tries to win the next general election in six months or so. He will not make any cuts or even reduce spending.

Ironically, UK is in a position for a very strong recovery, done the hard way, but real this time. The pound is low and must remain so, there simply can't be a lending fuelled boom, and public spending will have to be substantially reduced. With plenty of cheap skilled labour UK could boom, although unfortunately the populace may suffer quite badly, same us expats.

A strong recovery? With respect, you are the only voice on the surface of this planet who thinks that the UK is in a position for a strong recovery.

But that still leaves the question, is the Thai bt overvalued (in toto) ?. Remember before the world economic fog descended on Thailand, it had a fog of it's own, and I wonder whether this is not the case still ? Public debt is set to soar too. With the bt growing ever stronger against the dollar I can see no end to the export slump soon.

I don't remember any fog before the crisis, just a lot of vapour coming from TVers thinking the THB was too strong. Thailand still has considerable and increasing foreign reserves. And our man Churchill just posted a couple of interesting articles

http://www.thaivisa.com/forum/Malaysia-Tha...27#entry3035327

http://www.thaivisa.com/forum/Us-Auto-Firm...82#entry3033582

All I can see in the UK is reduced investment, an excess of ageing manufacturing capacity, tax, debt, regulation, government and now strikes (post and underground).

Obviously the political instability in Thailand is seen as less of a threat to business than the political incompetence in the UK.

[mommysboy]

In all honesty the arguments you present are quite bleak and politically tainted IMHO. Couldn't we just put quantitative easing down as the main factor here and leave it at that? Not that the UK economy is not in a state, but then again aren't they all? To argue differently would be an argument of small differences*

Actually no, the UK is probably the worst off, apart from outriders such as Iceland. Britain went into the recession with massive public and private debts and has not really come out of the recession, and has vastly bigger debts. I can't see where it is well position at all. Brown still has six months or so to complete his scorched earth policy as he desperately tries to win the next general election in six months or so. He will not make any cuts or even reduce spending.

Ironically, UK is in a position for a very strong recovery, done the hard way, but real this time. The pound is low and must remain so, there simply can't be a lending fuelled boom, and public spending will have to be substantially reduced. With plenty of cheap skilled labour UK could boom, although unfortunately the populace may suffer quite badly, same us expats.

A strong recovery? With respect, you are the only voice on the surface of this planet who thinks that the UK is in a position for a strong recovery.

But that still leaves the question, is the Thai bt overvalued (in toto) ?. Remember before the world economic fog descended on Thailand, it had a fog of it's own, and I wonder whether this is not the case still ? Public debt is set to soar too. With the bt growing ever stronger against the dollar I can see no end to the export slump soon.

I don't remember any fog before the crisis, just a lot of vapour coming from TVers thinking the THB was too strong. Thailand still has considerable and increasing foreign reserves. And our man Churchill just posted a couple of interesting articles

http://www.thaivisa.com/forum/Malaysia-Tha...27#entry3035327

http://www.thaivisa.com/forum/Us-Auto-Firm...82#entry3033582

All I can see in the UK is reduced investment, an excess of ageing manufacturing capacity, tax, debt, regulation, government and now strikes (post and underground).

Obviously the political instability in Thailand is seen as less of a threat to business than the political incompetence in the UK.

IT"S VERY BLEAK AND VERY TAINTED. There's no pointing discussing further.

[mommysboy]

"I'm going for a range of 48bt - 56bt to the pound in the short term".

You're a laugh a minute MB but know that you are loved regardless.

Well I suppose it is rather stating the obvious.

But what is not obvious, and has not been discussed is your bullishness regarding Thailand's future. Given the present economic factors, not least the strength of the bt, why do you feel Thailand is in such a promising position CM?

My take is that Thailand has been underperforming for a few years now and was losing it's competitiveness before the slump. It has a severe problem regarding exports which is the key driver of the economy, and is highly dependent on the US which like most other economies is unlikely to show much of a recovery in demand. Growth is forecast to be 2-3% for several years which is not enough to pay debt and support public spending and so the already growing public debt is likely to grow larger still. Please if you do answer it must be a a little bit more than stating Thailand is part of Asia and demand shortfall will be made up elsewhere.

And again without queering the pitch like Drinkmore (who seems to be suffering the hangover for doing just that) why so dismissive of UK's position ?. If nothing else a 25% sale does give Blighty a tad of an edge in the Euro market wouldn't you say? And the historic precedent is the 90's recovery. This is nothing new for UK.

[teletiger]

IT"S VERY BLEAK AND VERY TAINTED. There's no pointing discussing further.

Quite right too.

12, how dare you suck the sugar-coating off of your opinions in public. Some of us are of a delicate nature.

Regards.

[12DrinkMore]

IT"S VERY BLEAK AND VERY TAINTED. There's no pointing discussing further.

Quite right too.

12, how dare you suck the sugar-coating off of your opinions in public. Some of us are of a delicate nature.

Regards.

Sugar coated opinions from me? I don't think so. Jeeze, even my mother called me abrasive, inconsiderate and argumentative.

:D :D

However, I do seem to have soured Mommysboy a little, I suppose with a moniker like that I should exercise a little more restraint.

:D

Sorry MB, just TEASING, although I know you'll hate me forever now, OUCH!

[mommysboy]

IT"S VERY BLEAK AND VERY TAINTED. There's no pointing discussing further.

Quite right too.

12, how dare you suck the sugar-coating off of your opinions in public. Some of us are of a delicate nature.

Regards.

Sugar coated opinions from me? I don't think so. Jeeze, even my mother called me abrasive, inconsiderate and argumentative.

However, I do seem to have soured Mommysboy a little, I suppose with a moniker like that I should exercise a little more restraint.

Sorry MB, just TEASING, although I know you'll hate me forever now, OUCH!

Drinkmore, whatever part of outer space teletiger descended from to give his inane views certainly stoked you up. Evidence in the extreme to knock the 'wife beater' on the head for a while. try Leo altogether a milder brew. When were you back in the UK by the way? 1973.

[mommysboy]

IT"S VERY BLEAK AND VERY TAINTED. There's no pointing discussing further.

Quite right too.

12, how dare you suck the sugar-coating off of your opinions in public. Some of us are of a delicate nature.

Regards.

TXat !

[12DrinkMore]

Drinkmore, whatever part of outer space teletiger descended from to give his inane views certainly stoked you up. Evidence in the extreme to knock the 'wife beater' on the head for a while.

Don't quite understand the reference there.

try Leo altogether a milder brew.

actually I've moved to Chang Light, which has cured the early morning nausea.

When were you back in the UK by the way? 1973.

Well last time I had the pleasure of paying taxes to HM government was a decade later in 1983. But the last time I was back was some five years ago, as another member of my family had decided that they couldn't take anymore under Brown. Stayed for the funeral and came back asap. Terrible place, expensive and felt threatened by gangs of teenagers on the streets.

[teletiger]

TXat !

Was that meant to be hurtful? How infantile.

Does Mommy know you drink beer?

Regards.

[mommysboy]

TXat !

Was that meant to be hurtful? How infantile.

Does Mommy know you drink beer?

Regards.

Regards! well perhaps a little mis-spelling there too!

Did you have any useful comment to make by the way?

I doubt anyone wants you on this thread in all honesty.

[mommysboy]

Drinkmore, whatever part of outer space teletiger descended from to give his inane views certainly stoked you up. Evidence in the extreme to knock the 'wife beater' on the head for a while.

Don't quite understand the reference there.

try Leo altogether a milder brew.

actually I've moved to Chang Light, which has cured the early morning nausea.

When were you back in the UK by the way? 1973.

Well last time I had the pleasure of paying taxes to HM government was a decade later in 1983. But the last time I was back was some five years ago, as another member of my family had decided that they couldn't take anymore under Brown. Stayed for the funeral and came back asap. Terrible place, expensive and felt threatened by gangs of teenagers on the streets.

Uh! you mean threw a number 7?

I was back a couple of months ago and in all honesty it was like stepping in to a 5 star hotel compared to Thailand- everything was clean and worked.

I agree about the violence and in fact got in to a fight just walking down the street. This was on a Tuesday morning after a bank holiday. Some idiot nearly got knocked over. I turned round to see what the commotion was only to receive a barrage of abuse . Something snapped in me I wasn't going to take it and I charged. Bit of a comical scene really as neither of us were fighters and it ended with a lot of swearing and hot air. Think the other guy was on drugs and full of hot air. Wonder where teletiger's from?

[teletiger]

You're probably a very nice chap. But you do come across as a bit of a plum. You might want to work on that.

Regards.

[mommysboy]

You're probably a very nice chap. But you do come across as a bit of a plum. You might want to work on that.

Regards.

Yank right?

I mean chap, plum!