You and your Thai Wife of 20 years.

[churchill]

There are rumors that this is about to happen

Jim ‘the BRIC’ O’Neill’s big call http://ftalphaville.ft.com/blog/2010/02/15...eills-big-call/

If it doesn't happen now , it will likely happen very soon - Presumably Asian currencies would appreciate by the same amount ?

and Euro/sterling /$ will depreciate ?

[chiang mai]

The effect of that move would make regional exports more expensive - so, it would be down to individual central banks in the region to determine how much stronger they wanted/could afford their individual currencies to become. At this stage I would doubt that Thailand wants the Baht to move too much more against Western currencies but over time, yes, the effect would be a depreciation against GBP & EURO, a good reason to not sell your Thai real estate I reckon.

[churchill]

"The dollar is overvalued, arguably by 15 to 20%. The problem is that the dollar cannot depreciate unless other major currencies are allowed to appreciate. Thus far, the impact of dollar adjustments has been mainly on the euro and yen. Southeast Asian currencies, including the Indonesian rupiah, Thai baht, Singapore dollar and Malaysian ringgit, have also appreciated against the greenback.

The scope for further appreciation of these currencies – and by extension further depreciation of the US dollar – is very limited, as currency appreciation tends to hurt economies by rendering their exports uncompetitive. The US dollar can depreciate, as it must, only if some other key currencies appreciate.

The dark horse in the currency matrix is the Chinese yuan, which has not budged in recent times. The yuan did appreciate by roughly 20% after China moved off the dollar-peg regime in favour of a basket peg regime in 2005, but the yuan was de facto re-pegged to the US dollar three years later by assigning nearly 100% weight to the US currency in the so-called currency basket.

Since then, the yuan has depreciated with the dollar. Herein lies the anomaly, in which an undervalued yuan is shackled to an overvalued dollar, making it absolutely unsustainable.

Be this as it may, China may have its own reasons for keeping its yuan tied to the dollar. For one thing, this would help increase China’s export market share, especially in the US, by rendering its exports competitive. For another, it would protect China’s vast foreign exchange reserves, which are largely dollar-denominated.

While this may make considerable sense to China, it does not go down well with its neighbours whose currencies have been appreciating against the yuan. Nor does it go down well in the US, whose currency would depreciate only if China is willing to share the burden of currency adjustments with the Eurozone and Japan by allowing its own currency to appreciate.

The chances of China revaluing its yuan look slim in the near term, given its huge stake in the US market as an exporter of manufactures and its vast exposure to the US as a creditor. China will not make the mistake Japan made in 1985 in accepting the Plaza Accord, which led to a soaring yen, from which Japan has yet to recover. International pressure is therefore unlikely to work insofar as China’s yuan is concerned.

This means that global rebalancing, in balance-of-payments terms, hinges critically on China’s exchange rate policy. There is hope that China might be persuaded by its neighbours, in the name of East Asian economic regionalism, to let its currency appreciate gradually. If not, it is almost certain that China will eat into the market share of its neighbours, whose currencies would appreciate against the dollar and the yuan.

The yuan will appreciate only if the dollar does. But a strong dollar is not in the interest of the US economy or global rebalancing. Given this conundrum, countries such as Thailand and Malaysia may have no choice but to peg their currencies to China’s yuan so they are not disadvantaged by China’s exchange rate policy. As the old adage goes, “if you can’t beat them, join them”."

http://www.turkishweekly.net/news/98053/th...ange-rates.html

[chiang mai]

bump, anyone? am curious to understand thoughts on this one.

[flying]

Why would China want to let their currency appreciate?

Are they not in a great spot right now?

Don't They have weak ..food,energy & infrastructure

I think USA is still one of the or the biggest exporter of food right?

With all their treasuries doesn't China have a high spot/leverage wise?

With the rising dollar they can buy more with their reserves including commodities no?

Seems like they would be the last ones to upset the cart right now as they benefit by staying just as they are.

Edited February 21, 2010 by flying