Currency Madness!

[TiredTeacher]

This is insane! The Pound to the Thai Baht is around 47.05 and the $ to the Thai Baht is 32.37. Only a week or so ago it was roughly the same for the $ and about 1 Baht more for the Pound.

We have WW-III in Bangkok (exaggeration, but I am sure you get the meaning), embassies evacuating, the airport is quiet (less people coming in and has been for some time)....

Surely this is an artificially managed currency situation?

Didn't the Bank of Thailand say all this has no effect about a week back? Who is managing the currency for whose benefit?

I do not see it being in the benefit of foreigners coming here and for all the businesses linked to tourism. Nor do I see it benefiting Thai export businesses. So, who is at the top of the list?

[nam-thip]

I once read that whilst the Thai baht is linked to the American dollar it will remain a strong currency irrespective of the trouble and strife that goes on within the country.

I reckon if the Thai baht stood alone and was not linked to a strong currency like the American dolar then it would crash for sure.

Edited May 16, 2010 by nam-thip

[tw25rw]

They're not linked in any formal sense, but the policy of the BOT is stability. Letting it slide won't benefit the country. It will just make life more expensive.

[barryofthailand]

The Thai Baht remains the second strongest currency in Asia.

Barry

[ronz28]

Thailand has more foreign currency reserves than the USA or the UK.

http://en.wikipedia.org/wiki/List_of_count...change_reserves

[cavelight]

Now 45.5b for sterling at Krungsri.

For plenty of expats here, this is a disaster. If it hits 40, I think a few people will have to start surviving on the cheapest rice and a few nicked canoon. The UK is s**t hitting a powerful fan right now.

[Pib]

Maybe what has been saving the US Dollar from depreciating too much against the baht is because the dollar has gained strength against most other currencies like the Euro and Pound; thereby, preventing a big depreciation against the baht. If the dollar had not been gaining strength as a safe haven currency (a mattress may be a better place for your money), my guess is it would have depreciated much more against the baht...like what is happening with the Euro and Pound.

[vicco]

If you only compare the baht against a few weak currencies like Sterling and the Euro....both of which are influenced by massive sovereign debt then the baht is going to look pretty good. There are other currencies however where there has been little fluctuation over the past year or so. --Can and Aus $ for example. The US dollar has made a

bit of a comeback recently---but again only against those other very weak currencies. It has become a case of the US being a mess, but the UK and now EU are becoming

even bigger messes. What a mess...

[neil324]

If you only compare the baht against a few weak currencies like Sterling and the Euro....both of which are influenced by massive sovereign debt then the baht is going to look pretty good. There are other currencies however where there has been little fluctuation over the past year or so. --Can and Aus $ for example. The US dollar has made a

bit of a comeback recently---but again only against those other very weak currencies. It has become a case of the US being a mess, but the UK and now EU are becoming

even bigger messes. What a mess...

Go to the other extreme why not, commodity curruncies are in a bull market, but what happened to them after the 2008 deleveraging? With contagion spreading its looking like 2008 again but worse. The US benifits from flight to saftey but are heading to their own sovereign debt crisis.

Edited May 17, 2010 by neil324

[roamer]

Thailand has more foreign currency reserves than the USA or the UK.

http://en.wikipedia.org/wiki/List_of_count...change_reserves

About 3 years ago I spoke with a couple of guys who had been seconded to BOT from a specialist UK accountancy firm to advise on money laundering, prevention of. BOT were very much against this but gave into very firm US pressure. These guys came away shell shocked at some of the accountancy practices in place and I've remained extremely sceptical ever since.

That notwithstanding, it flies in the face of all reason to believe that the baht can remain strong if the political situation continues to deteriorate. Having said that I remind myself again that TIT, this is Thailand and the totally absurd is often the norm.

[FarangBuddha]

Baht is not strong...euro and pound are weak (due to sovereign debt, weak banks, and low-growth economic prospects). How many times does this have to be reiterated?

Against countries with strong economies and growth prospects, e.g., Australia, the baht is down (in this case about 10%) year-on-year.

[waza]

Baht is not strong...euro and pound are weak (due to sovereign debt, weak banks, and low-growth economic prospects). How many times does this have to be reiterated?

Against countries with strong economies and growth prospects, e.g., Australia, the baht is down (in this case about 10%) year-on-year.

Actually the Aussie dollar is down 1.5 baht since the start of the government crackdown against the protestors. EG: over the last week.

[Time Traveller]

Thailand has more foreign currency reserves than the USA or the UK.

http://en.wikipedia.org/wiki/List_of_count...change_reserves

About 3 years ago I spoke with a couple of guys who had been seconded to BOT from a specialist UK accountancy firm to advise on money laundering, prevention of. BOT were very much against this but gave into very firm US pressure. These guys came away shell shocked at some of the accountancy practices in place and I've remained extremely sceptical ever since.

I guess they were not used to seeing honest reporting !

In the following link scroll down to 2000 onwards and you''ll see all the big names accounting firms make regular entries

http://en.wikipedia.org/wiki/Accounting_sc...unting_scandals

[Gambles]

The Thai Baht remains the second strongest currency in Asia.

Barry

stats please, Barry - that's totally untrue over the periods I've researched.

[cyberia]

150 billion in currency reserves is not all that much in my view.

If investors start seriously pulling out of Thailand, that money wont last more than a few month.

My ex wife is russian and since I made some investments in the russian market I have been watching it for the last few years.

So, what happened there when the crisis hit a year something ago is the foreign investors started to sell their assets at a rapid pace thus

effectively creating an influx of the local (ruble) currency on the market.

In order for the ruble not to collapse the central russian bank had to step in and buy the ruble using their foreign currency reserves.

I cannot remember exactly how much a day the BOR (bank of russia) was spending but it was somewhere around 3-5 Billion USD.

The BORs currency reserves at that time were in the range of 450 Billon or so.

As a result, in less than 2 months, the central bank lost close to 150 Billion USD or more, cannot remember.

Well after that they started letting the ruble float and it dropped 10 points from 25 to a dollar to 35 to a dollar.

The BOR still had about 300 Billion to spend and much more in gold reserves but they decided on taking the less risker road I guess.

My guess is,

if the investors are selling their thai assets and the numbers are large, BOT is buying the Baht and effectively depleting its currency reserves.

By how much depends on how much is sold.

If the assumption is correct, some time in the near future the BOT will run out of its reserves.

I'm not an xpert on finances by any means, just speaking from my own life experience.

[Naam]

150 billion in currency reserves is not all that much in my view. If investors start seriously pulling out of Thailand, that money wont last more than a few month.

I'm not an xpert on finances by any means, just speaking from my own life experience.

that is quite correct. you submitted the proof above investors pulling out of Thailand have no bearing on foreign reserves.

[Slip]

So a question (which I hope is not too off topic). If you guys had a modest amount of Thai savings- let's say a million baht, what would you be doing with it now?

[sokal]

So a question (which I hope is not too off topic). If you guys had a modest amount of Thai savings- let's say a million baht, what would you be doing with it now?

Buy dividend paying Thai stocks.

Thailand's GDP came in at 3.8% growth. Estimates where 1.8%, BHT positive

[THAM]

So a question (which I hope is not too off topic). If you guys had a modest amount of Thai savings- let's say a million baht, what would you be doing with it now?

Buy dividend paying Thai stocks.

Thailand's GDP came in at 3.8% growth. Estimates where 1.8%, BHT positive

Any suggestion on a good, safe, dividend-paying stock? With EU & Dow rolling down, where else can one save or invest his 'million baht'?

[MJP]

The Quid seems to have stabilised for now, albeit at a bit of a low level. Let's see what the budget brings, perhaps some hideous truths, perhaps some serious austerity which by the looks of it won't be too bad since the Labour government had been burning through cash on the ludicrous.

Job hunting in the UK right now (although I'm here in Thailand). It's not completely dead over there which was a surprise.

[NADTATIDA1]

The Quid seems to have stabilised for now, albeit at a bit of a low level. Let's see what the budget brings, perhaps some hideous truths, perhaps some serious austerity which by the looks of it won't be too bad since the Labour government had been burning through cash on the ludicrous.

Job hunting in the UK right now (although I'm here in Thailand). It's not completely dead over there which was a surprise.

It depends on what line of work you are in? but it is as close to dead as its been for many a year its worth keeping in mind that there is always a little boost to the employment figures at this time of year due to the better climate and tourism.

[MJP]

The Quid seems to have stabilised for now, albeit at a bit of a low level. Let's see what the budget brings, perhaps some hideous truths, perhaps some serious austerity which by the looks of it won't be too bad since the Labour government had been burning through cash on the ludicrous.

Job hunting in the UK right now (although I'm here in Thailand). It's not completely dead over there which was a surprise.

It depends on what line of work you are in? but it is as close to dead as its been for many a year its worth keeping in mind that there is always a little boost to the employment figures at this time of year due to the better climate and tourism.

Bit of a strange one which I expected to be dead, completely dead. Land regeneration. I clean mud. Millions of tonnes of it. I also dig and refill holes.

Very rewarding career.

[ThaiPauly]

When I read that Hung Parliament was on the cards in the UK I transfered enough to last me here for 2 years, at a rate of 50B to the pound

Hopefully that should be long enough for the rate to stabalise a bit against the pound...but mabe not

None of us has a crystal ball, but looking at things as they stand it's probably the first decision I ever got right

Or maybe in 12 months I will regret it

[Pib]

I think you made the right decision.

[Gambles]

150 billion in currency reserves is not all that much in my view.

If investors start seriously pulling out of Thailand, that money wont last more than a few month.

My ex wife is russian and since I made some investments in the russian market I have been watching it for the last few years.

So, what happened there when the crisis hit a year something ago is the foreign investors started to sell their assets at a rapid pace thus

effectively creating an influx of the local (ruble) currency on the market.

In order for the ruble not to collapse the central russian bank had to step in and buy the ruble using their foreign currency reserves.

I cannot remember exactly how much a day the BOR (bank of russia) was spending but it was somewhere around 3-5 Billion USD.

The BORs currency reserves at that time were in the range of 450 Billon or so.

As a result, in less than 2 months, the central bank lost close to 150 Billion USD or more, cannot remember.

Well after that they started letting the ruble float and it dropped 10 points from 25 to a dollar to 35 to a dollar.

The BOR still had about 300 Billion to spend and much more in gold reserves but they decided on taking the less risker road I guess.

My guess is,

if the investors are selling their thai assets and the numbers are large, BOT is buying the Baht and effectively depleting its currency reserves.

By how much depends on how much is sold.

If the assumption is correct, some time in the near future the BOT will run out of its reserves.

I'm not an xpert on finances by any means, just speaking from my own life experience.

speaking from experience is often the only real way to know something but sometimes even then it's ahrd to fully know what you've seen and what you haven't...

$150 Bn is a huge amount of Thai Baht - look at the size of Thailand economically versus Russia, look at THB traded volumes - about the only thing that Russia and Thailand have in common economically is that each own half of Pattaya

In Baht terms it's a huge amount

and remember that what we're talking about here is a form of intervention described as sterilisation - almost a passive acquisition of Forex by the BoT (they do then manage it with some level of activity) whereby they are accepting Fx reserves rather than trading these back into THB and pushing the Baht higher

The problem currently is maintaining a policy of keeping Baht weak which they've managed relatively successfully versus other regional currencies not of stopping it weakening as per your Russian story

So I think that your experiences of a similar looking but fundamentally very different situation are leading you down a blind alley here...

[Gambles]

So a question (which I hope is not too off topic). If you guys had a modest amount of Thai savings- let's say a million baht, what would you be doing with it now?

I'd buy assets that were appropriate to my own investment situation in terms of currency, liquidity and risk

[PCA]

So a question (which I hope is not too off topic). If you guys had a modest amount of Thai savings- let's say a million baht, what would you be doing with it now?

I'd buy assets that were appropriate to my own investment situation in terms of currency, liquidity and risk

Come on Paul, that can't be all. Be a bit more specific and help the guy out with an answer saying more than nothing otherwise why reply in the first place? Let us see your skills are higher set than that of an educated salesman reading from the book...

[Abrak]

So a question (which I hope is not too off topic). If you guys had a modest amount of Thai savings- let's say a million baht, what would you be doing with it now?

My genuine advice not based on return or capital appreciation is that you should keep it as Thai baht on deposit. I have no idea what your annual costs are or what currency your income comes in but you need a cushion for both estimated and potential liabilities.

It is very important that you finance your life, with a high degree of probability that things might go wrong before you even think of investing in risk assets.

[Gambles]

So a question (which I hope is not too off topic). If you guys had a modest amount of Thai savings- let's say a million baht, what would you be doing with it now?

I'd buy assets that were appropriate to my own investment situation in terms of currency, liquidity and risk

Come on Paul, that can't be all. Be a bit more specific and help the guy out with an answer saying more than nothing otherwise why reply in the first place? Let us see your skills are higher set than that of an educated salesman reading from the book...

Sorry if it sounded glib, PCA, didn't mean to but I know of nothing of Slip's plans, needs, liquidity requirements, risk profile, age, background, family status, other assets etc etc and I'd just got off a 12 hour flight! Seeing as I've been prodded with a fork I'll stir very slightly into life

In general terms someone with Baht base currency to any extent should look at some exposure to Thai Baht denominated assets.

These fall into 2 categories

Thai assets

International asset hedged into Baht

The latter is a much bigger set than the former and depending upon the needs it may be most efficient to pick from both pools - e.g. for a diversified portfolio of property, equities, bonds, commodities, precious metals, hedge funds, alternatives, managed cash then you have to look at a global portfolio hedged into Baht - there just isn't a sufficiently large, mature and diversified market in Thailand (Abrak will tell you that the SET throws up exceptional opportunities to investors like himself and that's true and harnessing that as a satellite to your core portfolio can also make sense too)

However for a current account then you really need to use a local bank - you can't really replicate that service through hedging

These are the extremes - in between lies a whole range of other issues that might favour some international expsoure and some local exposure and indeed the question of currencies needs to be explored - the extent to which the lifestyle of even a Thai resident should be permananently exclusively tied to Baht and this is where it really is different for everyone

I kn ow that's a boring answer but I now need to go and take the splinters out of my backside from sitting on this fence!

Seriously that is the right kind of answer but throw some real or hypothetical scenarios at me and I'll fire back the kinds of questions that this would raise and then ultimately the kinds of answers or recs that we would give in response to that. Could be fun?

Edited May 28, 2010 by Gambles

[Gambles]

So a question (which I hope is not too off topic). If you guys had a modest amount of Thai savings- let's say a million baht, what would you be doing with it now?

My genuine advice not based on return or capital appreciation is that you should keep it as Thai baht on deposit. I have no idea what your annual costs are or what currency your income comes in but you need a cushion for both estimated and potential liabilities.

It is very important that you finance your life, with a high degree of probability that things might go wrong before you even think of investing in risk assets.

Good advice, A - we don't even know enough about Slip to know whether he's in a position to cover costs or not - which was part of my point too