Exporters Warned As Baht Heads Towards 30 Per Dollar

[webfact]

Exporters warned as baht heads towards 30 per dollar

By Wichit Chaitrong

The Nation

The baht is bracing for further appreciation, possibly approaching 30 per US dollar in the second quarter next year, according to the Bangkok branch of Bank of TokyoMitsubishi UFJ, which predicted heavy repercussions on exporters with lowmargin products.

Roong Sanguanruang, chief market analyst of the bank, said at a Thailand Market Association seminar on interest rates and the foreignexchange outlook yesterday that the baht was expected to move in the range of 30.7532.25 to the dollar in middle of next year. Earlier, Kasikornbank's treasurer expected the baht to end this year at 31 per dollar.

Coupled with the appreciation is greater volatility, Roong said. Movement of the US dollar was harder to predict because of the interaction of two main market forces. One predicts the exchange rate by guessing what the US Federal Reserve will do. The other force engages in risktaking. The market participants often interpret the same news differently, causing fluctuating movements of the exchange rate, she said.

The Chinese yuan is expected to continue to appreciate gradually, as the Chinese government tries to prevent export shocks caused by any sharp rise of its currency.

Other regional currencies will also appreciate in tandem. For example, the Indonesia rupiah and the Malaysia ringgit rose almost 10 per cent in one year against the dollar as of August 6, Roong said, while the baht rose about 5 per cent. But in the past few weeks the baht has risen sharply, a bit late compared with other currencies, she said. The potential for high growth has contributed to the strength of currencies in emerging Asia.

Roong also said the Bank of Thailand might increase its policy rate from 1.5 per cent to 2 per cent by the end of this year to curb inflation. The central bank would, however, be cautious about raising the rate because of the risk of an economic slowdown and political uncertainty.

The yen will also rise in the next 12 months but it will weaken in the long run because of persisting deflationary tendencies in Japan, she said.

Sompop Manarungsan, president of the Panyapiwat Institute of Technology, said exporters of labourintensive products would be hit hard by low margins. "A 10percent baht rise could make many exporters lose money," he said.

New central bank governor Prasarn Trairatvorakul will face a challenge over how to manage the baht as investors flee the US market and move their money into Asia, which recently has caused a sharp rise in the Thai stock market, he said.

The global economy also faces the risk of a bondbubble crisis that could devastate the global economy as the subprime crisis did in 2008, he warned. Bond prices have increased and driven down yields as investors seek safe havens.

While the United States is still implementing an expansionary monetary policy, Europe has started to implement exit strategies because of the threat of a publicdebt crisis. "Our government should follow Europe by reducing spending on populist programmes, otherwise the country could face a sovereign debt crisis in the near future," he warned.

-- The Nation 2010-08-21

[Jimi007]

I just looked at charts of the USD, GBP, EUR, CNY and JPY. They are all down against the Baht. The Yen being the least down. BOT needs to wake up, they seem to not want foreign investment or tourism from the largest economies. The dollar was at 29 something the other year, I seem to remember though.

Why aren't imported goods going down in price? Hmm, I guess it's not a free market economy?

Edited August 21, 2010 by Jimi007

[inthepink]

What do you expect the BOT to do? They can't change a long term trend based on fundamentals.

Also, why do you think a central bank that was intent on weakening its currency would attract foreign investment? Would you invest money here if you thought the BOT were going to do their best to ensure it was worth less in the future?

Edited August 21, 2010 by inthepink

[astral]

That is going to screw those on Retirement visas.

[geriatrickid]

I just looked at charts of the USD, GBP, EUR, CNY and JPY. They are all down against the Baht. The Yen being the least down. BOT needs to wake up, they seem to not want foreign investment or tourism from the largest economies. The dollar was at 29 something the other year, I seem to remember though.

Why aren't imported goods going down in price? Hmm, I guess it's not a free market economy?

No it is not a free market economy. However, the USA isn't either. Nor is Japan, nor is the EU. The problems Thai exporters are facing have been bothering AUstralian and Canadian exporters for the past 2 years. There is not much one can do if the rest of the world is plagued by crappy economies.

[Heng]

That's why you have to fill those buckets while the tide is up.

Thanks for the warning, although I think most exporters have been watching this ball the whole time.

[otherstuff1957]

That phrase 'exit strategies' is interesting. My exit strategy is to move my savings from $ to Baht this week!

[JimGant]

My exit strategy is to move my savings from $ to Baht this week!

Well, hopefully that'll reverse the dollar's slide.....

Thanks in advance.

[jb5music]

I just looked at charts of the USD, GBP, EUR, CNY and JPY. They are all down against the Baht. The Yen being the least down. BOT needs to wake up, they seem to not want foreign investment or tourism from the largest economies. The dollar was at 29 something the other year, I seem to remember though.

Why aren't imported goods going down in price? Hmm, I guess it's not a free market economy?

While I've seen evidence of falongs in Thailand selling things I never personally

tried to sell back anything I'd ever purchased in 4 years in Thailand. It seams

almost surreal to think of standing there trying to sell say my motorbike for

Thai baht to Thai people walking by. Foreigners never sell anything in thailand

I don't think. They just actually rent it for as long as they are there.

[midas]

I just looked at charts of the USD, GBP, EUR, CNY and JPY. They are all down against the Baht. The Yen being the least down. BOT needs to wake up, they seem to not want foreign investment or tourism from the largest economies. The dollar was at 29 something the other year, I seem to remember though.

Why aren't imported goods going down in price? Hmm, I guess it's not a free market economy?

Well as it gets even stronger I cannot see what would continue to attract foreign investors who will be exporting to open a business in Thailand with such a huge disparity between the Thai baht compared to currencies of Vietnam or Cambodia or even China ? In Vietnam they have just devalued the Dong yet again !

And at the end of the day I think you also get better value for money from a worker in those other countries compared to a worker in Thailand.

[inthepink]

The dong and the yuan are both pegged currencies allowing their governments to set artificial exchange rates. The baht was floated in 1997 so there's very little point in comparing the economic policies of Vietnam and China with those of Thailand, unless you are suggesting they start to go backwards and reintroduce a pegged currency.

The Bank of Thailand can't just decide to devalue the baht, they would have to use monetary policy and open market operations. The first, usually implemented by changes in the interest rate, would most likely lead to inflation spiralling out of control as the economy here is expanding much more quickly than economies in the West. OMOs are usually only effective in the short term and are not sustainable against a long term major trend.

Edited August 22, 2010 by inthepink

[TheGhostWithin]

The Baht is officially floated, however unofficially pegged by the BOT who control it by purchasing US dollars. Ifyou visit fxhistory.com you can look at historical values between USD/THB. Now take a look at USD rates vs other countries - only the pegged currencies and the baht are virtually unchanged (a few baht does not make it floating).

For example, look at the variations between NZD, AUD, EUR - these are true floating currencies. These are markets which rise and fall based on export sucesses and import consumption demand. The Thai baht is built on quite something else - ensuring that you cant get as many baht per USD as you can for the yen, or the kip...

I have traded currencies for 7 years and made a lot of money from it - if you want to have nice holidays but cant obtain baht where you live, simply buy USD and you will be just as well off when you arrive and convert in Thailand - this works for the same reason, that it is virtually pegged to the dollar.

All these two banks are stating, is that they are expecting BOT to acknowledge this year that the USD dollar has weakened on an international scale, and that they are going to allow some movement in the exchange rates to reflect this fact. The NZ Dollar overall is very weak, yet we are on market highs with USD.

This is a facade, and more likely just an attempt by BOT to streamline the export industry by cutting off the fat of the market and make those that survive more efficient to compete with Vietnam rice production exports, which is now outpacing Thailand. BOT realises that if they cannot compete with Vietnam rice export prices, the only thing Thailand will be able to export are bar girls and Pad Thai after Sanuk yuu tee Soi Sii.. Ka pom.

[jsflynn603]

"Europe has started to implement exit strategies because of the threat of a public debt crisis."

So Europe says....after bailing out Greece with a huge pile of cash, and little effect. Watch the Euro drop against the dollar this week, though in year or two I would be surprised not so see 25baht/US$. The US will use Quantitative Easing (QE0 to infinity and the parity of the dollar will plummet. Yes, it is complex, as fear drives currency to Poppa dollar, and Momma Yen, and the Swiss Miss so the ups and downs will be crazy. But remember that the US State of California is is far, far worse debt straights that Greece, and much, much larger.

America talks about implementing exit strategies, but 2 trillon $ in Alt-A mortgages reset over the next 18 months. This is a scenario very much like the sub-prime debacle. (Note: Alt-A mortgages go like this: "You can't afford the 500,000 house, but we'll tell you what we can do--we'll give you a loan at 3% for three years, but after three years the rate can rise 2% each year. Thus millions are facing a jump in mortgage rates from 3% to 5% this year, and 7% next year, and so on, and almost all of these types of mortgages are "under water" (this means if you bought a house for $500,000 it's probably worth $320,000 today. America has no exit strategy, and neither does Europe, unless Germany and France Exit the Union. Everything is smoke and mirrors.

Had I the minimum US$ 10,000 I'd open a brokerage account in Thailand today for I think Thailand will prosper over the next decade, especially in relation to its proximity to powerhouse China.

The person who said he'd change his savings into baht is wise, I think.

[Beetlejuice]

That is going to screw those on Retirement visas.

Not just for those in retirement, it is bad news all round for everyone in Thailand.

Retirees, the tourist industry, exporters and those who obtain their incomes from abroad. This long lasting economic situation is going to break people. Many will simply not be able to ride this out for the long term.

I cannot see an end to this in sight.

Edited August 22, 2010 by Beetlejuice

[seanocasey]

we are in for an extended period of slow growth , dead in the water, high and sticky unemployment, between 10-18%, volatile markets, more frequent recessions. That is what you get when you have a deleveraging environment resulting from a credit crisis. It is what happens when the Debt Super-cycle ends. We start the journey to the New Normal and it just takes time.

[kissdani]

That is going to screw those on Retirement visas.

Not just for those in retirement, it is bad news all round for everyone in Thailand.

Retirees, the tourist industry, exporters and those who obtain their incomes from abroad. This long lasting economic situation is going to break people. Many will simply not be able to ride this out for the long term.

I cannot see an end to this in sight.

If i read on TVF, the old men on retirement visa don't like it much in Thailand anyway. So its maybe motivates them to go finally home. Nobody lose but win win.

It is great news for people who want go abroad. Holiday in Berlin, Paris, London becomes kinda cheap or just enjoy web-shopping oversee.

Not so good for exporters, i would agree. But if you run your business as Import&Export or trade goods for goods everything should be fine. Many contracts are also long term basis fixed month ago and not from day-day. And these traders still know how to make their profit. And if you an importer you have a happy time. Good for them.

Foreign people who made investments when the baht was weaker will not suffer from buyer's remorse.

[Thai at Heart]

Something has got to give sometime.

This piece of elastic is only so long, but as yet, export figures appear to be holding up very well. Tourism is impossible to gauge since the whole world is economically a mess, so even if all other things were equal, the numbers were always going to be bad anyway.

As for people talking about the agriculture business, maybe this is a simple way to squeeze the middle men who sit provide absolutely no value to the chain of business at all. The most obvious benefit is to be seen in industry making investments with imported capital goods. The amount of investment going in and around in some areas right now is massive, and I can't help feeling that once these investments are made and largely paid for, we might see a little release of this appreciation.

Is the entire policy being run to satisfy a few large conglomerates to make high value capital investments?

[Piengrudee]

Good news for us Thai. Finally our currency appreciate rather than depreciate.

[Spee]

There is not much one can do if the rest of the world is plagued by crappy economies.

Well, let's clarify that just a little, and say that the world (western world anyway) is plagued by healthy market economies that are seriously infected with disease-ridden government policies and hinderances. The US economy and dollar are in the tank because the government is monetizing large chunks of massive debt by printing currency like it is going out of style. That the dollar is in the shitter should not be a surprise to anyone. The Euro and Pound are similarly infected.

Edit.

I don't think this will affect Thai exports such rice and seafood to the US. Virtually all of the frozen shrimp on US shelves comes from Thailand, and will continue to be so. The only thing that will change is the price will go up.

Edited August 23, 2010 by Spee

[kissdani]

Good news for us Thai. Finally our currency appreciate rather than depreciate.

[inthepink]

The Baht is officially floated, however unofficially pegged by the BOT who control it by purchasing US dollars. If you visit fxhistory.com you can look at historical values between USD/THB. Now take a look at USD rates vs other countries - only the pegged currencies and the baht are virtually unchanged (a few baht does not make it floating).

How does a value ranging from 45 baht to the dollar down to under 30 baht to the dollar over the last 10 years count as being virtually unchanged then? A increase of of over 33% is more than a few baht in my opinion.

[Jingthing]

Good news for us Thai. Finally our currency appreciate rather than depreciate.

It is good news for SOME Thais. It is tragic news for other Thais.

[Thongkorn]

Good news for us Thai. Finally our currency appreciate rather than depreciate.

It is good news for SOME Thais. It is tragic news for other Thais.

TOO true , the haves will have more, and the have nots will pay more to live.

[Heng]

Sweet.

[Kwasaki]

UK basic pension about 97sqid a week.

assuming level stays around 150 mark

Dollar 31.5 aprox today UK 48.5 = aprox 4,700 bahoes.

Dollar 25.5 say the UK 38.5 = aprox 3,700 " .

Still Ok ! live on it easy here, like Thailand but Thailand loses 1000 a week.

[Ricardo]

If i read on TVF, the old men on retirement visa don't like it much in Thailand anyway. So its maybe motivates them to go finally home. Nobody lose but win win.

It is great news for people who want go abroad. Holiday in Berlin, Paris, London becomes kinda cheap or just enjoy web-shopping oversee.

Not so good for exporters, i would agree. But if you run your business as Import&Export or trade goods for goods everything should be fine. Many contracts are also long term basis fixed month ago and not from day-day. And these traders still know how to make their profit. And if you an importer you have a happy time. Good for them.

Foreign people who made investments when the baht was weaker will not suffer from buyer's remorse.

"Nobody lose but win win"

I'm not so sure my gardener & maid would agree with you, that the departure of their employer might benefit them, nor the teachers at my sons' school or employees & owners of the the restaurants & other businesses we spend significant sums of money with.

Or perhaps you will be happy to pay more tax, so the government can support them, once I don't ? !

But I would agree that a stronger Baht should encourage Thais to travel more, and import more for domestic-consumption, both would be a good thing.

[Jimi007]

Good news for us Thai. Finally our currency appreciate rather than depreciate.

Why is it good for you? Are you going to go to the USA on holiday? Are you planning on investing overseas? Is it good that less tourist will come and spend less money when they do? Is it good because most people here on a foreign income will spend less? Are imported product prices going to be reduced? Where is the upside, except for the wealthy 5% of the Thais who can invest overseas and go on a holiday?

[lovelomsak]

Just another one of my another way to see it economy posts. I feel Thailand must keep a strong baht. Donot believe sll you read about trade and banks. Thailand can benefit quite a lot on the long term with the yuen rate going the way it is. As I have stated many times before in other posts Thialand will become the main broker for asain goods with the rest of the world. As long as they can get US dollars for cheap they are in the drivers seat.Come back and talk to me in 5 years and see how the world economies have changed because the masses are ignorant to what is really happening. In past posts I have tried to tell all of you the direction things are going but have been met with How it is suppose to go not how it is going. Time for a wake up call guys.

Thialand and China are just gaining momentum and all the other players living in denial.

People keep asking how can the baht keep increasing open your eyes to the advantages in these times. Not how you want it to be but how it is. Asia needs one currency to evolve as its new currency of trade because the way yen is tied to the american dollar it has become redundant. China doesnot want to be the one and Thailand is open to so it so it will be done.

When the dragons is fulling awake and in charge just look and see how important a role Thailand plays. The way things are going the American dollars position of power will be lost forever in possibly 5 years.Get ready for a new reality.

One final things about financial experts you are all listening too. They got us in the present position we are in who is to say they cannot do even more damage with their expert wisdom.My advice is stop listening to the experts they say what they want to have happen and what you want to hear just like any salesman.

[gotlost]

UK basic pension about 97sqid a week.

assuming level stays around 150 mark

Dollar 31.5 aprox today UK 48.5 = aprox 4,700 bahoes.

Dollar 25.5 say the UK 38.5 = aprox 3,700 " .

Still Ok ! live on it easy here, like Thailand but Thailand loses 1000 a week.

At the moment 31.14 USD 47.81 GBP...

[inthepink]

I think you probably meant 48.7, not 47.8