Thailand Actively Seeking To Cheapen The Baht

[Khun Bob]

I get emails from the daily reckoning as I've had some magazines from the publisher behind them. I read some of them as i think there can be some good information in them, but am dubious as well. Today I got one making grand statements about where gold is going and how much you may make. One sentence in there states :

" Japan is selling the Yen... Korea, Malaysia and Thailand are actively seeking to cheapen their currencies... even the European Union is hoping to boost exports by weakening the Euro"

I know there is a relationship between USD and the Baht, but is the Thai goverments or whoever actively seeking to weaken the baht ?

[OldAsiaHand]

In a word, no.

Partly, I would think because it would serve no real purpose for Thailand just now, and partly because they know they couldn't even if they wanted to (after the debacle of 1997, the central banki obviously understands that now).

The ability of a cental bank in a small country to manipulate the value of a minor currency is so limited as to be effectively useless. The level of the Thai baht is going to be determined by a vastly greater powers than the Thai government can bring to the table (the unexpected uptick in the US dollar and the looming adjustments to the Chinese monetary system being two of the major players right at the moment).

[chippendalesam]

In a word, no.

Partly, I would think because it would serve no real purpose for Thailand just now, and partly because they know they couldn't even if they wanted to (after the debacle of 1997, the central banki obviously understands that now).

The ability of a cental bank in a small country to manipulate the value of a minor currency is so limited as to be effectively useless. The level of the Thai baht is going to be determined by a vastly greater powers than the Thai government can bring to the table (the unexpected uptick in the US dollar and the looming adjustments to the Chinese monetary system being two of the major players right at the moment).

<{POST_SNAPBACK}>

Dear Asiahand, it seems to me you may be well versed in the currency trade business. I am a youngster, please give me your on opinion on where the baht will be to the U.S. dollar by years end 2005. Thanks for your time, Sam. Old I guess in experience, aye asia hand ?

[bkk_mike]

If it was obvious where it was going to be - it would already be there (or at least just be out by the cost of funds).

This is the point of an FX market - the current rate is basically where the people who think the baht is undervalued is matched by the people who think the baht is overvalued. If sentiment moves, the exchange rate moves... - and if everyone "knew" where it would be in a years time, the market would move accordingly.

Nobody "knows" where the market will be in a year's time. A lot of people who thought the baht / $ rate would stay at 25 lost a LOT of money in 1997. Personally, I "think" it will hang around at 40ish to the dollar unless some sort of shock occurs. Mainly because that's roughly where the government wants it to be (currency stability is a good thing for exporters), and will try to avoid doing anything to push it up (raising interest rates) or down (turning on the printing presses, with the resulting inflation...). But that's just my personal guess. I don't bet my money on it - so why should you bet yours on anybody elses hunch.

Edited May 9, 2005 by bkk_mike

[OldAsiaHand]

<{POST_SNAPBACK}>

Dear Asiahand, it seems to me you may be well versed in the currency trade business. I am a youngster, please give me your on opinion on where the baht will be to the U.S. dollar by years end 2005. Thanks for your time, Sam. Old I guess in experience, aye asia hand ?

<{POST_SNAPBACK}>

The previous poster is quite right, of course. Prediciting markets is pretty poor science. Nevertheless, everyone who has any money does it everyday. Whatever choices they make are a prediction, even if that choice is to do nothing at all.

At the moment there is an oddly even spit among most observers on the more probably future course of the baht. As a result a lot of folks are taking those in the market who think it will strengthen, subtracting those who think it will weaken, and getting zero. That then leads them to the conclusion that most likely nothing at all will happen. Have you ever noticed that the usual market wather's prediction in most places (for equities, bonds, real estate, currency, whatever) is that what ever is happening right then will continue to happen, but perhaps just a little less?

Anyway, you asked for my opinion and you shall have it for whatever it is worth. The end of 2005 is eight months away. On the whole, and discounting unpredictable political shocks, I would say that over that period the bias is toward a strengthening baht rather than a weakening one. Not by a lot, perhaps, but perhaps something in the 3-5% range. I would place the chances of the baht moving in that fashion at 65-70%.

So there you go, as I said, for what it's worth.

[devildog683]

i've heard that one reason the euro is stronger then the dollar is it has larger denominations, therefore is preferred by some "business" owners