Will The Pound Go Higher

[AnnyLing]

They manage their currency against a supposedly 'secret' basket of currencies right?

*****

Wrong !

[AnnyLing]

Seeing as a financial institution would have to buy dollars with pounds before buying baht with the dollars, were you to trade with a bank in the foreign exchange market, it would seem obvious that the GBP/USD exchange rate is always relevant.

An interesting theory. Source a Bangkok tuk-tuk driver ?

[gotlost]

At 31.10 USD and 48.05 GBP its per speculation.

[inthepink]

Seeing as a financial institution would have to buy dollars with pounds before buying baht with the dollars, were you to trade with a bank in the foreign exchange market, it would seem obvious that the GBP/USD exchange rate is always relevant.

An interesting theory. Source a Bangkok tuk-tuk driver ?

Source is Tier 1 foreign exchange dealers who make the market for international currency exchange transactions, something which you patently know nothing about. Markets in currencies are made against the dollar and although you have the optical illusion of being able to trade the Euro against the GBP as an example, what in fact happens is that the Euros you bought with GBP would have to be converted into dollars along the way. This is why spreads are considerably wider on such transactions and why cross pairs are more volatile (as there are two separate exchange rates involved).

Why not cut the insulting comments and actually research a subject before you come wading in making facetious remarks.

Edited August 25, 2010 by inthepink

[gotlost]

Today's cheerful news. 31.12 USD 47.90 GBP:annoyed:

[Naam]

Seeing as a financial institution would have to buy dollars with pounds before buying baht with the dollars, were you to trade with a bank in the foreign exchange market, it would seem obvious that the GBP/USD exchange rate is always relevant.

An interesting theory. Source a Bangkok tuk-tuk driver ?

Source is Tier 1 foreign exchange dealers who make the market for international currency exchange transactions, something which you patently know nothing about.  Markets in currencies are made against the dollar and although you have the optical illusion of being able to trade the Euro against the GBP as an example, what in fact happens is that the Euros you bought with GBP would have to be converted into dollars along the way. This is why spreads are considerably wider on such transactions and why cross pairs are more volatile (as there are two separate exchange rates involved).

Why not cut the insulting comments and actually research a subject before you come wading in making facetious remarks.

that is correct and applies when you are trading/converting "real" money (which none of us have unfortunately ). peanuts amounts USD value 50k, 100k or even 1mm are traded within a big bank by "currency out of one section of the petty cash vs. currency out of another section of the petty cash" without involving any external trader except perhaps for checking prevailing cross rates on the screen.

p.s. to the best of my knowledge tuk tuk drivers are not involved

[inthepink]

Yes I was referring to interbank trading with minimum lots of 5M USD, more normally 10.

I don't know why tuk-tuk drivers are assumed to have such a poor knowledge of international finance anyway

[Naam]

They manage their currency against a supposedly 'secret' basket of currencies right?

*****

Wrong !

why "wrong"? is the basket not secret?

[longway]

Does the Chinese governement have a hand in managing the value of the baht? They manage their currency against a supposedly 'secret' basket of currencies right? It would be logical that the baht is one of them.

Feel free to shoot down the idea. I am just curious.

The Baht is too small of a currency to be considered in this context, it's value can be easily manipulated by the central bank at relatively low cost so no, I doubt seriously that the Chinese play a role in managing its value. What does exist in place of that however is a series of regional currency swaps that ensure trading partners in the region (ASEAN) are not damaged by regional currency fluctuations.

Sorry, but I want to argue this point with you.

I assume you mean the thai central bank. AFAICS they cannot manipulate the baht, they do their best to manage its seemingly inexorable rise, by smoothing out fluctuations, but that is about as much as they can do. (Thailand could not manage their currency in 1997 and I would think its the same now).

The reason I mention the chinsese, even though Thailand is a small player, it certainly has its place in the region, and it would be in China's interest to make sure the Yuan does not rise too strongly against the baht or any of the other SE asian currencies. However I am just making guesses here...

Thanks for the info about currency swaps I had never heard of these till now.

[longway]

They manage their currency against a supposedly 'secret' basket of currencies right?

*****

Wrong !

I don't suppose you would care to expand upon your answer, would you?

[flying]

I wish I had the balls to move more money here.

May I ask what worries you about doing so?

[Naam]

I wish I had the balls to move more money here.

May I ask what worries you about doing so?

and may i ask why?

[euca]

Does the Chinese governement have a hand in managing the value of the baht? They manage their currency against a supposedly 'secret' basket of currencies right? It would be logical that the baht is one of them.

Feel free to shoot down the idea. I am just curious.

The Baht is too small of a currency to be considered in this context, it's value can be easily manipulated by the central bank at relatively low cost so no, I doubt seriously that the Chinese play a role in managing its value. What does exist in place of that however is a series of regional currency swaps that ensure trading partners in the region (ASEAN) are not damaged by regional currency fluctuations.

Sorry, but I want to argue this point with you.  

I assume you mean the thai central bank. AFAICS they cannot manipulate the baht, they do their best to manage its seemingly inexorable rise, by smoothing out fluctuations, but that is about as much as they can do. (Thailand could not manage their currency in 1997 and I would think its the same now).

The reason I mention the chinsese, even though Thailand is a small player, it certainly has its place in the region, and it would be in China's interest to make sure the Yuan does not rise too strongly against the baht or any of the other SE asian currencies. However I am just making guesses here...

Thanks for the info about currency swaps I had never heard of these till now.

Yes, this has been interesting me for a few days, now.  I read [can't remember where but I suspect the Daily Tel] that, dissatisfied with US Treasury Bonds, the Chinese have been preferring of late to buy into other currencies including the Baht.  I would surmise that even a relatively small [for the Chinese] purchase of Thai Baht would push up its price causing the GBP & the USD forex rates to fall against it.  Clearly we have some informed commenters on here and I should be interested to read their thoughts.  I ought to reply to the OP.  I think the GBP will decline over the medium term but much depends on Osborne's October review and the tenacity with which the Coalition cuts back.  I am hopeful of a brief and small surge immediately after he speaks in The Commons next month.

[Naam]

my prediction it will peak at 54 in the next 2 months

The markets are predicting a rise as confidence in the pound follows the new austerity measures.

your prediction has 18 days left to become reality