Strong Thai Baht Only For A Short Period

[mommysboy]

Thai Baht is not necessarily strong, but other currencies are displaying weakness. Watch for the sovereign debt crisis that is brewing in Europe and will eventually hit the US. All fiat paper currencies are in a race to devalue against each other which inevitably leads to the value of the only true currency at a minimum maintaining its value ...i.e. Gold Bullion

Compared to what? Compared to the YEN perhaps not, but but every other currency well, heck, it's strong.

[spirit47]

Thai Baht is not necessarily strong, but other currencies are displaying weakness. Watch for the sovereign debt crisis that is brewing in Europe and will eventually hit the US. All fiat paper currencies are in a race to devalue against each other which inevitably leads to the value of the only true currency at a minimum maintaining its value ...i.e. Gold Bullion

That's right...

Now it's time to change, I hope so, the Euro-Bath chart is on a strong resistant at 43, the dollar shows a resistant point too, but not so strong at 30. Whatever you think about Chartanalysis, it works because a lot of professionals use Charts for rulings...

So I look frindly into the future and my income will be much more in the next months.

You see in this thread that fundamentals not able to explain what happens. The big-boys making the game, maybe they push sometimes stronger to make more money by higher risk.

80% that the Euro on his deepest point now...

[ray23]

To really understand the process you need to recognize the strength of the BOT. It's been trough three Governments thus far and at some point told them all no. They are still there, could be because they are not appointed by Politicians.

Their stated goal has been to keep it stable. The have done that for the most part through the economic mess. At points they have drawn lines in the sand. Then made efforts to keep the baht in that area. No matter what the Western Currencies are doing within limits.

At times that has meant appreciating or depreciating the baht.

It's going to move a to Western Currencies. But, as slowly a possible.

My belief for the last few weeks they were anticipating violence in the protests. they let the baht gain strength to off set the risk of what appeared to be a valid risk. So far no violence as it was expected. Then you had a change of policy, making it easier to move money out of Thailand.

This has all been recent activities, things really didn't go as the they thought it would. The baht became much stronger then they or most people expected. Now they are trying to weaken the baht. In the end they do have to compete in the export market.

The BOT has been under constant and great pressure from the business people and the the politician's. But they don't answer to any of them. They have followed the marching orders as they have been given. Based on that they have in fact did a good job. Although none of us like it.

If there is change it will be slow and controlled.

Edited March 21, 2010 by ray23

[Abrak]

Based on that they have in fact did a good job. Although none of us like it.

If there is change it will be slow and controlled.

I dont think the BoT has done a particular good job of sterlization. It is short baht and long US$70bn. That sound like a pretty crummy trade.

I think the baht will be determine by 3 factors.

1) Chinese Yuan

2] Sterilization pretty much out of ammo.

3) A trade off between rising inflation and an aprreciating currency.

I never know whether the Bot uses core (things that done go up in price) or CPI.

The extent of strerilization of C/A and capital inflows has been pretty large over the last two years and sterilization is effectively reverse QE (I think). C/A inflows would cause massive appreciation where BoT swaps into local baht bonds (running Bt600bn) a month. Or of cause it would cause massive inflation. I think the BoT has say US$70bn of bonds financed by cash doing nothing but sitting at the BoT

Edited March 21, 2010 by Abrak

[ray23]

Good Point. But, staying in their marching orders is where they did a good job. That was all I was referring to. It ha been amazing to watch they have been pressured from every side in the past four years, they never flinched.

At the moment inflation is my biggest fear. The value of your income down, the cost of living up, that's not a good combination.

Thailand created funding in many ways. not just he exchange rate. Import duties all of sudden they started seizing motorcycles. Not because they were being used on the roads illegally, but to get the tax revenues up. The ATM fees.

Not fun but dollar holders have seen it lower as little as 29.

Ok here is where you can educate me. When they got the dollar at 29 are those dollars worth more today?

If the dollar gets some of it's value back over the next five years, will they gain?

[ray23]

http://www.bangkokpost.com/breakingnews/17...baht-fluctuates

Sorry couldn't resist, tell me one more time the BOT doesn't do this.

[chiang mai]

http://www.bangkokpost.com/breakingnews/17...baht-fluctuates

Sorry couldn't resist, tell me one more time the BOT doesn't do this.

The operative phrase is highlighted - it's long been BOT policy to prevent wild, erratic and sudden movements in the currency, that doesn't mean anything more than just that.

"BOT governor Tarisa Watanagase always said the central bank will have to prevent the baht from fluctuating too much as that may create difficulties to exporters," he said. He said the central bank had no policy to maintain the baht's value".

[ray23]

Your right Chaing Mai, but many seem to think they could not have an effect and that is simply wrong.

What I'm curious about, why did we see so much money into the stock market last week. I know about Thailand relaxing their law about taking investment money back out. However given the facts on the ground last week, wouldn't seem prudent to be investing here now.

There were no riots a good thing, but no one could have really known that last week. It was huge amount of money flowing in, anyone understand that one? I will leave that to the guys who have a better knowledge of this sort of thing, shut my mouth and learn.

It did in fact effect the rate exchange.

[chiang mai]

Your right Chaing Mai, but many seem to think they could not have an effect and that is simply wrong.

What I'm curious about, why did we see so much money into the stock market last week. I know about Thailand relaxing their law about taking investment money back out. However given the facts on the ground last week, wouldn't seem prudent to be investing here now.

There were no riots a good thing, but no one could have really known that last week. It was huge amount of money flowing in, anyone understand that one? I will leave that to the guys who have a better knowledge of this sort of thing, shut my mouth and learn.

It did in fact effect the rate exchange.

I think you have to separate the two issues: currency risk resulting from political unrest is very capably managed by the BOT, as we saw last week - this is/was a downside risk. I personally don't believe that any ammount of political upheaval short of outright civil war is likely to unhinge THB in a way that BOT can successfully manage.

The second issue of increased capital inflows also represent a currency risk but is an upside risk, in the past BOT has implemented currency controls (no longer in place) to mitigate this risk. Why have capital inflows increased? Simply because the Thai economy, on the surface at least, is in far better shape than many of its Western counterparts hence it is attracting funds that would otherwise have been targeted at Western markets.

Edited March 22, 2010 by chiang mai

[ray23]

Your right Chaing Mai, but many seem to think they could not have an effect and that is simply wrong.

What I'm curious about, why did we see so much money into the stock market last week. I know about Thailand relaxing their law about taking investment money back out. However given the facts on the ground last week, wouldn't seem prudent to be investing here now.

There were no riots a good thing, but no one could have really known that last week. It was huge amount of money flowing in, anyone understand that one? I will leave that to the guys who have a better knowledge of this sort of thing, shut my mouth and learn.

It did in fact effect the rate exchange.

I think you have to separate the two issues: currency risk resulting from political unrest is very capably managed by the BOT, as we saw last week - this is/was a downside risk. I personally don't believe that any ammount of political upheaval short of outright civil war is likely to unhinge THB in a way that BOT can successfully manage.

The second issue of increased capital inflows also represent a currency risk but is an upside risk, in the past BOT has implemented currency controls (no longer in place) to mitigate this risk. Why have capital inflows increased? Simply because the Thai economy, on the surface at least, is in far better shape than many of its Western counterparts hence it is attracting funds that would otherwise have been targeted at Western markets.

Thanks Chaing Mai great explanation.

[Abrak]

http://www.bangkokpost.com/breakingnews/17...baht-fluctuates

Sorry couldn't resist, tell me one more time the BOT doesn't do this.

The operative phrase is highlighted - it's long been BOT policy to prevent wild, erratic and sudden movements in the currency, that doesn't mean anything more than just that.

"BOT governor Tarisa Watanagase always said the central bank will have to prevent the baht from fluctuating too much as that may create difficulties to exporters," he said. He said the central bank had no policy to maintain the baht's value".

Chiang Mai absolute complete <deleted>.

How much does it cost to 'stabilize' your exchange rate. Would US$5bn to US$10bn be enough? Afterall they are not try to influence the underlying value of the baht.

The BoT has a short position in baht of US$60bn. They have spent twice as much suppressing the baht as they did supporting in 1997. It is a bit annoying really - you have really good currency so you go and short it. And everybody could see them do it so they kept going long until they eventually started allowing it to appreciate so that the country now has the costs of a less competitive currency along with an ever increasing loss on their short.

I do think that comment of not having a policy to maintain the value of the baht is a plain lie when you have used 25% of the value of GDP to suppress it. And it wasnt as though nobody noticed.

I just wish they would show some financial irresponsibility and had done it to begin with. Which Ray is why many of the new funds are attracted into the stockmarket. Because the next step (which should have been the first step) is too loosen monetary policy and boost inflation expectations.

[chiang mai]

http://www.bangkokpost.com/breakingnews/17...baht-fluctuates

Sorry couldn't resist, tell me one more time the BOT doesn't do this.

The operative phrase is highlighted - it's long been BOT policy to prevent wild, erratic and sudden movements in the currency, that doesn't mean anything more than just that.

"BOT governor Tarisa Watanagase always said the central bank will have to prevent the baht from fluctuating too much as that may create difficulties to exporters," he said. He said the central bank had no policy to maintain the baht's value".

Chiang Mai absolute complete <deleted>.

How much does it cost to 'stabilize' your exchange rate. Would US$5bn to US$10bn be enough? Afterall they are not try to influence the underlying value of the baht.

The BoT has a short position in baht of US$60bn. They have spent twice as much suppressing the baht as they did supporting in 1997. It is a bit annoying really - you have really good currency so you go and short it. And everybody could see them do it so they kept going long until they eventually started allowing it to appreciate so that the country now has the costs of a less competitive currency along with an ever increasing loss on their short.

I do think that comment of not having a policy to maintain the value of the baht is a plain lie when you have used 25% of the value of GDP to suppress it. And it wasnt as though nobody noticed.

I just wish they would show some financial irresponsibility and had done it to begin with. Which Ray is why many of the new funds are attracted into the stockmarket. Because the next step (which should have been the first step) is too loosen monetary policy and boost inflation expectations.

Abrak: I'm having difficulty understanding what it is that I wrote that you think is complete b******s, can you explain? I mean yes, I understand that BOT is spending Baht and buying USD but that's entirely consistent with their stated aim of "preventing wild, erratic and sudden movements in the currency", if they didn't do that then the value of THB would strengthen and exports would get hurt.

[Abrak]

Abrak: I'm having difficulty understanding what it is that I wrote that you think is complete b******s, can you explain? I mean yes, I understand that BOT is spending Baht and buying USD but that's entirely consistent with their stated aim of "preventing wild, erratic and sudden movements in the currency", if they didn't do that then the value of THB would strengthen and exports would get hurt.

Sorry, Chiang Mai. What I meant was you highlighted 'preventing wild erratic movements' rather than the statement that the BoT has 'no policy to maintain the value of the baht.'

Preventing wild erratic movements suggest a smoothing of the underlying trend in the baht. It shouldnt be an expensive process - so maybe US$5-10bn. Actually the really key operative phrase here is 'no policy to maintain the value of the baht'. They had a massive intervention policy to suppress its value. US$60bn dollars worth - equivalent to 25% of GDP. And they basically run out of money or shall we say it reach the stage that it was counter productive. You have to admit US$60bn is not an erratic movement prevention exercise.

And Chiang Mai they didnt have to do it and it was a massive waste of money. I hope you can see that Thailand's underlying fundamentals are infinitely better than the US. Bernanke is one of the world's most experienced devaluers. If you believe that shorting the baht was likely to be a good trade to stop the baht appreciating against the dollar you are highly optimistic (I personally would call it pretty stupid.) The more you short, the bigger the hole you are digging yourself and very soon everyone is helping you dig. So a country with great fundamentals and an undervalued currency now has the added attraction of a Central Bank massive short position.

And Chiang Mai if you are trying to maintain your currency against a crappy US$ and Ben Bernanke you really have to start with an underlying philosophy that you need to show at least as much irresponsibility as him and you should start by trying to make your currency less attractive rather than even more. Boosting inflation and committing to low rates is perhaps a good start. You get more leverage - through increasing future inflation expectations than the loss of competitiveness of a currency appreciation.

The policy was complete nonsense.

Do you really believe that spending US$60bn was a good idea or 'capably managed' by the BoT? Personally I think she should have been sacked.

Edited March 22, 2010 by Abrak

[chiang mai]

Abrak: I'm having difficulty understanding what it is that I wrote that you think is complete b******s, can you explain? I mean yes, I understand that BOT is spending Baht and buying USD but that's entirely consistent with their stated aim of "preventing wild, erratic and sudden movements in the currency", if they didn't do that then the value of THB would strengthen and exports would get hurt.

Sorry, Chiang Mai. What I meant was you highlighted 'preventing wild erratic movements' rather than the statement that the BoT has 'no policy to maintain the value of the baht.'

Preventing wild erratic movements suggest a smoothing of the underlying trend in the baht. It shouldnt be an expensive process - so maybe US$5-10bn. Actually the really key operative phrase here is 'no policy to maintain the value of the baht'. They had a massive intervention policy to suppress its value. US$60bn dollars worth - equivalent to 25% of GDP. And they basically run out of money or shall we say it reach the stage that it was counter productive. You have to admit US$60bn is not an erratic movement prevention exercise.

And Chiang Mai they didnt have to do it and it was a massive waste of money. I hope you can see that Thailand's underlying fundamentals are infinitely better than the US. Bernanke is one of the world's most experienced devaluers. If you believe that shorting the baht was likely to be a good trade to stop the baht appreciating against the dollar you are highly optimistic (I personally would call it pretty stupid.) The more you short, the bigger the hole you are digging yourself and very soon everyone is helping you dig. So a country with great fundamentals and an undervalued currency now has the added attraction of a Central Bank massive short position.

And Chiang Mai if you are trying to maintain your currency against a crappy US$ and Ben Bernanke you really have to start with an underlying philosophy that you need to show at least as much irresponsibility as him and you should start by trying to make your currency less attractive rather than even more. Boosting inflation and committing to low rates is perhaps a good start. You get more leverage - through increasing future inflation expectations than the loss of competitiveness of a currency appreciation.

The policy was complete nonsense.

Do you really believe that spending US$60bn was a good idea or 'capably managed' by the BoT? Personally I think she should have been sacked.

It's tempting to look at the issue of the $60/70 billion with the benefit of hindsight and of course if we do that we can now see that it was perhaps not the most cost effective strategy, but if we go back in time and look at the problem from a "now" perspective I think the approach that was adopted stands up to the test of reasonableness. In light of the knowledge that their currency was going to strengthen, exports were at risk and the degree of recovery in the global recovery uncertain, taking pre-emptive action that cost 60/70 billion was probably not a wholly bad idea, actually I think it was probably a substantially risk averse one. Does that strategy delay the inevitable? Well yes, to some degree but things have now moved on and the risk picture is somewhat different, Thai GDP has improved, exports are on a more positive footing and Chinese growth is more solid, so allowing the inevitable now is arguably a better approach than doing so whilst the economic picture was fuzzy.

[Gobbledoc]

edit, I removed post, cant be bothered with the non believers, re BOT intervention.

Edited March 23, 2010 by Gobbledoc

[chiang mai]

edit, I removed post, cant be bothered with the non believers, re BOT intervention.

It's difficult to know from that statement Gobbledoc exactly what you think on this subject, you started so may as well finish!

[Gobbledoc]

I tottaly agree with CM reply to this post.

As of 12 Mar 131.4B USD in usable FX reserves, they do use it, even as recently as last Friday the BOT made a public statement saying they regularly intervene in the Baht from the BOT them selves...... Any serous investor interested in Thai will get hourly updates on the BOT intervention activities in the FX market for the Baht.

It is incredible that you folks thing the BOT can "control" the exchange rate of the baht. Economics 101 or a short course on currencies would enlighten you obviously over-inflated ideas of Thai power in that arena. The markets call the shots. Thailand and the BOT don't have enough reserves to buy and sell any quantity of currencies to cause a shift up nor down. Dream on. The answer is not Thailand's actions but the devaluation of the power currencies , The US DOLLAR and EURO, due to gross overspending and debt. Thailand, even though it too has economic woes, s just too insignificant a player in GDP, vs debt, that it has not felt the pressure against its baht. Lucky for Thailand. Your strong baht is killing my finances but that too shall pass from normal fluctuations and shifts. Thailands non-stop, head in the sand, non-competitive practices, will at some point cause loss of market share in many areas and the rise of stock in it's neighbors economy.

You simply don't understand that the BOT has been intervening to weaken their currency and this is easily within their capabilities - but regardless, your post is far too arrogant to warrant any further explanation from me on this subject.

[Abrak]

It's tempting to look at the issue of the $60/70 billion with the benefit of hindsight and of course if we do that we can now see that it was perhaps not the most cost effective strategy, but if we go back in time and look at the problem from a "now" perspective I think the approach that was adopted stands up to the test of reasonableness. In light of the knowledge that their currency was going to strengthen, exports were at risk and the degree of recovery in the global recovery uncertain, taking pre-emptive action that cost 60/70 billion was probably not a wholly bad idea, actually I think it was probably a substantially risk averse one. Does that strategy delay the inevitable? Well yes, to some degree but things have now moved on and the risk picture is somewhat different, Thai GDP has improved, exports are on a more positive footing and Chinese growth is more solid, so allowing the inevitable now is arguably a better approach than doing so whilst the economic picture was fuzzy.

And please dont say it was with the beneifit of hindsight. I mean I wrote lots about it on the Financial Crisis thread 6 months ago.

Here is just one. I am not a genius but all the hedge funds took advantage.

http://www.thaivisa.com/forum/Financial-Cr...44#entry3154044

Think of it as an investment trade. It takes stronger fundamentals, stricter monetary policy and ever increasing amounts of money to suppress the appreciation, so you long until they are forced to appreciate. You would sack the guy for shorting that. And Tarisa was told it was going to end in tears at least 2 months before this post.

If you dont want your currency to appreciate at least try and make it less attractive rather than more.

And you say that 'it was easily within the BoT's limits to weaken the currency.' well it was but not through intervention. You have strong fundamentals, an undervalued currency, tight monetary policy and a CB with a US$60bn baht short. This is a speculators wet dream. At US$140bn of reserves the appreciation will be expensive and sterilization costs enormous. To things happen (1) the costs keep rising (and any currency competitive becomes less certain) and (2) the speculative capital flows will increase exponentially.

[lovelomsak]

The way I see it China is the country driving the bus for Asian money values. They do this with the yuan value.

BOC Governor Mark Carney has it right and here is quote from yahoo.ca today

quote

Carney is the second Canadian policy-maker in as many days to warn about the devalued yuan. On Tuesday, Finance Minister Jim Flaherty said Canada will push the issue at the upcoming G20 meetings in Toronto in June. A revaluation of the yuan would likely lead to adjustments in other fixed currencies in Asia, economists said. Unquote

Could Thailand currencies be affected? I strongly think so. I feel to understand what is happening with Thai baht we have to realize their are roque ways of taking financial power> After all governments are just big business and China has shown through its history their big business doesnot pay attention to foreign rules or ways of doing things. They make their own rules and plan accordingly. Its all in the timing. Mark my words about Thailand becoming the brokers for China.

Edited March 25, 2010 by lovelomsak

[pooket]

If Vietnam has a weak Dong, maybe they should eat more red meat.

Seriously, this article goes against everything I've been reading about Asian currency and the dollar. Thailand is so small, there is NOTHING they can do that will seriously impact the strength of the baht.

[spirit47]

Thai Baht is not necessarily strong, but other currencies are displaying weakness. Watch for the sovereign debt crisis that is brewing in Europe and will eventually hit the US. All fiat paper currencies are in a race to devalue against each other which inevitably leads to the value of the only true currency at a minimum maintaining its value ...i.e. Gold Bullion

That's right...

Now it's time to change, I hope so, the Euro-Bath chart is on a strong resistant at 43, the dollar shows a resistant point too, but not so strong at 30. Whatever you think about Chartanalysis, it works because a lot of professionals use Charts for rulings...

So I look frindly into the future and my income will be much more in the next months.

You see in this thread that fundamentals not able to explain what happens. The big-boys making the game, maybe they push sometimes stronger to make more money by higher risk.

80% that the Euro on his deepest point now...

Don't need to read newpaper, most of you make it very difficult, look at the markets and the charts, don't explain with brain, it not works...

[Gambles]

It's widely accepted that financial intervention in liquid currencies generally has little market impact. It's believed by many people but still not definitively known (except to a few people on this thread!!!) just how much consistent, long-term impact the likes of BoT can have on their currencies.

But that is relative impact. At the moment the Baht is in a room full of 800Lb gorillas:

How much further can Sterling fall against USD

How much further can Euro fall?

When will AUD fall?

Where the heck is Yen headed?

After all of the above are answered - how far will the Dollar fall from the nosebleed heights at which it finds itself?

and the biggest Gorilla of all - what will PBoC do with RMB?

Global Markets Asia recently suggested a managed currency peg for the Baht - you can't have full market free float without a huge cost attached if the biggest regional currency and potentially the biggest global currency aren't playing the same game with the same rules.

Everyone wants a weaker currency but only China currently has this figured - hence western frustration at being outsmarted so far.

[ray23]

Well currently it is believed that China actually wants to increase the value, to hedge inflation. How that is going to effect the other local currencies ?

[scotbeve]

Thai Baht is not necessarily strong, but other currencies are displaying weakness. Watch for the sovereign debt crisis that is brewing in Europe and will eventually hit the US. All fiat paper currencies are in a race to devalue against each other which inevitably leads to the value of the only true currency at a minimum maintaining its value ...i.e. Gold Bullion

That's right...

Now it's time to change, I hope so, the Euro-Bath chart is on a strong resistant at 43, the dollar shows a resistant point too, but not so strong at 30. Whatever you think about Chartanalysis, it works because a lot of professionals use Charts for rulings...

So I look frindly into the future and my income will be much more in the next months.

You see in this thread that fundamentals not able to explain what happens. The big-boys making the game, maybe they push sometimes stronger to make more money by higher risk.

80% that the Euro on his deepest point now...

38 - 40 baht would seem realistic. Methinks (IMHO) someone higher up may be shoring up the baht until coffers run low. Any other opinions ?

[Gambles]

Well currently it is believed that China actually wants to increase the value, to hedge inflation. How that is going to effect the other local currencies ?

I don't think tooo many people believe that

China may cave to pressure - revalue upwards by 5-10% and the gradually claw much of that back in barely perceptible daily moves - and then again China may just stick up 2 fingers if Congressmen and Senators don't stop yapping

[Gambles]

Thai Baht is not necessarily strong, but other currencies are displaying weakness. Watch for the sovereign debt crisis that is brewing in Europe and will eventually hit the US. All fiat paper currencies are in a race to devalue against each other which inevitably leads to the value of the only true currency at a minimum maintaining its value ...i.e. Gold Bullion

That's right...

Now it's time to change, I hope so, the Euro-Bath chart is on a strong resistant at 43, the dollar shows a resistant point too, but not so strong at 30. Whatever you think about Chartanalysis, it works because a lot of professionals use Charts for rulings...

So I look frindly into the future and my income will be much more in the next months.

You see in this thread that fundamentals not able to explain what happens. The big-boys making the game, maybe they push sometimes stronger to make more money by higher risk.

80% that the Euro on his deepest point now...

38 - 40 baht would seem realistic. Methinks (IMHO) someone higher up may be shoring up the baht until coffers run low. Any other opinions ?

Euro? -I'd be looking for well below 35 in time before Euro works out its long term direction

[Naam]

Euro? -I'd be looking for well below 35 in time before Euro works out its long term direction

and the LORD sent his prophets again

Edited April 6, 2010 by Naam

[JaoPaw]

What does the lord have to do with this? wanke_r!

Euro? -I'd be looking for well below 35 in time before Euro works out its long term direction

and the LORD sent his prophets again

[ray23]

Well currently it is believed that China actually wants to increase the value, to hedge inflation. How that is going to effect the other local currencies ?

I don't think tooo many people believe that

China may cave to pressure - revalue upwards by 5-10% and the gradually claw much of that back in barely perceptible daily moves - and then again China may just stick up 2 fingers if Congressmen and Senators don't stop yapping

Ya I think that statement was made to let them save face rather then caving into pressure.

[SaamBaht]

Based on P/E, the SET remains a strong buy at this time, despite its run up.