Regional Moves Needed To Curb Thai Baht Rise: Korn

[webfact]

Regional moves needed to curb baht rise: Korn

By ACHARA DEBOONME

THE NATION

'National policy required for public, private response'

Thailand needs to draw up a national policy and seek concerted action from Asian countries, as unilateral efforts have been futile in weakening their currencies against the US dollar amid excessive capital inflows that normalise the impacts of central banks' intervention, economists have said.

The suggestion comes after Finance Minister Korn Chatikavanij said in a teleconference from Washington DC last Saturday that the issue would be discussed at the G20 meeting next month.

Korn noted that the public and private sector must jointly consider options to adjust to the strong baht, to maintain competitiveness as weakening the baht would be tough to do "against the tide". Bank of Thailand could just soften the pace of appreciation and there was no sure way to weaken the baht, he said.

While the BOT was taking care of foreign exchange rates, his ministry would launch relief measures to soften the impact of the strong baht. Aside from measures to help SMEs, the Revenue and Excise Departments would come up with moves to speed up investment to lift production quality, Korn said.

While exporters have complained about the "lack" of intervention to steady the currency, the central bank has bought dollars massively to weaken the baht. This is especially true of the last few months, as reflected by growing international reserves. Reserves ballooned by US$18 billion (Bt540 trillion) from the end of June to $164.8 billion as of October 1. This is a sharp rise from $138.4 billion at the end of 2009. Despite intervention, the baht last week broke the 30 per dollar level, and now the market expects the currency to end the year at 28-29.

"Thailand has been on the right direction in slowing down the currency appreciation pace. We need measures to help the affected. More importantly, what we can do and must do is seek regional cooperation. Acting singly, Asian nations would never beat the trend. Second, we need to rebalance the situation, as with more outflows, the appreciation could slow next year," said Usara Wilaipich, a senior economist at Standard Chartered Bank (Thai).

She believes that concerted action would at least give a reason for dollar buying, concurrently ahead of the closing of trading accounts at the end of the year. "Traders are now scrambling for a reason to take money back home. This should help, at least in this round."

"BOT and other Asian banks will run out of resources to bring down their currencies soon," said a treasurer at a local bank who asked not to be named. "Thailand needs a longterm strategy, with a joint brainstorming session from the public and private sectors. How can Thailand survive when the baht is 20something per dollar. The central bank should no longer underwrite the risks for exporters. We have complained only on the negative impacts, but we haven't yet considered options to use the advantages in strengthening long-term competitiveness."

While admitting negative impacts on some, an economist noted that Thailand gains net benefits from the baht strengthening. While agriculture, labour-intensive and resources sectors are hard hit, benefiting from this are energy, auto parts, capital goods and raw material importers. Totally, benefits are double the size of losses.

CIMB Thai Bank executive vice president Padej Piroonsit, Siam Commercial Bank's economist Pornthep Jubandhu and Usara at Standard Chartered agreed that Thailand and other countries cannot fight this battle alone, as it is sparked by the weak dollar policy. Japan's intervention in September, the first since 2004, failed to weaken the yen. Thanks to US quantitative easing, which flooded global markets with liquidity, and to the fragile recovery in the US, investors are channelling money to wherever they find good economic growth stories - including Thailand, which in the first half recorded nearly 10 per cent in economic growth. Year to date, foreign investors have remained net buyers in the stock market, with net purchases surpassing net sales by Bt49.4 billion. More than Bt100 billion is invested in government bonds with maturity of over one year, marking a record high.

"In the past month, the strength of the baht had more to do with US dollar weakness than Thailand's economic fundamentals," said Thiti Tantikulanan, chief of Kasikornbank's Capital Markets Business Division. In September alone, the dollar weakened 10 per cent against the euro, 6.9 per cent against the Australian dollar, 5 per cent against the Indian rupee, 4.7 per cent against the Swiss franc, 4.6 per cent against the Korean won and 3.6 per cent against the Taiwanese dollar and Thai baht.

While suggesting Thailand not resume universal capital control, like the one imposed in 2006, as that will shock the financial market, an economist who asked not to be named suggest an investment in infrastructure projects, like logistics networks that rely heavily on imported equipment. While this would facilitate outflows, it would also enhance Thailand's long-term competitiveness.

The situation could get worse if the US Federal Open Market Committee announces a second round of quantitative easing on November 3, with the injection of over $500 billion into the economy.

"Whatever we do now, if the US announces another quantitative easing, a new round of inflow would hit Thailand in January," Usara said.

-- The Nation 2010-10-11

[Pib]

I'm sure the Thai govt will talk and talk and talk and talk and...........about doing something.

[kuffki]

I'm sure the Thai govt will talk and talk and talk and talk and...........about doing something.

Exactly, they been making statements and talking about this for at least 2 years now and still more talking.

Vietnam devalued its currency without much talk, so did other countries in the region, while Thailand will talk until the whole place crashes and then they will start to talk how to prevent it in the future and of course blame USA or whoever else.

[basjke]

I'm sure the Thai govt will talk and talk and talk and talk and...........about doing something.

Exactly, they been making statements and talking about this for at least 2 years now and still more talking.

Vietnam devalued its currency without much talk, so did other countries in the region, while Thailand will talk until the whole place crashes and then they will start to talk how to prevent it in the future and of course blame USA or whoever else.

If the place crashes as it did in 1997 they will put the blame with foreigners of course.You remember that in 1997 they raided the abn-amro and other foreign brokers offices because they were the cause of the baht crash.

They have only one thing in mind,back then and now,and that is that they can import on the cheap but they just don't give a dam_n that their exports and tourism industry suffers.

Because to understand the problem you need to look at the future and that is something that has never been taught in Thailand.

[hoaker]

investments in infrastructure by importing heavy machinery is a short term solution because it will be a while before these cap ex will be paid out for machineries again. What thailand need is to start FDI to other countries and ensure that the returns of these investments are balanced with domestic interest rates. As the returns form foreign investment increase in size, FDI into thailand will also need to slow other wise the demand for baht will continue to increase. Very tough for thais to solve as banks would like to keep rates high, attracting FDI..

Edited October 11, 2010 by hoaker

[hansnl]

The Baht is strong, nothing in the short run wil stop the appreciation.

However, the biggest importer in Laos is Thailand.

Prices of foodstuff and other products imported from Thailand are getting higher and higher.

A fact the Lao Government brought itself to suggest it would maybe become time to look elsewhere.

Lots of Thai products get more and more expensive, till a certain point will be reached.

Which effectively means that Thai exports will fall down.

And with it the Baht will drop.

Don't wait for it.

[mythBuster]

Kor cannot help it. Together with Abhisit he was not paying attention to his teachers in the UK. Just as Abhisit did not learn the lessons which will show he will get prosecuted for killing people in the streets,, Korn was too busy counting his parents money.The Baht is not rising, the dollar is sinking. Compared with a basket full of other currencies the Baht is even weakening against let's say the Euro, Yen or the AUD. Thailand, China, Brazil, India they cannot help that the americans overestimated themselves. The only reason the dollar is still worth something is because it is a reserve valuta for as long as it takes. Any normal country would have been punished for the mismanagement of the economy since George Bush took office. Obama does not get it either. A devaluation of the Dollar is unavoidable. Trying to peg your currency to a failing currency is utmost stupid, only the likes of Prem, Chuan and Chavalit did it and failed miserably.

[Acharn]

Kor cannot help it. Together with Abhisit he was not paying attention to his teachers in the UK. Just as Abhisit did not learn the lessons which will show he will get prosecuted for killing people in the streets,, Korn was too busy counting his parents money.The Baht is not rising, the dollar is sinking. Compared with a basket full of other currencies the Baht is even weakening against let's say the Euro, Yen or the AUD. Thailand, China, Brazil, India they cannot help that the americans overestimated themselves. The only reason the dollar is still worth something is because it is a reserve valuta for as long as it takes. Any normal country would have been punished for the mismanagement of the economy since George Bush took office. Obama does not get it either. A devaluation of the Dollar is unavoidable. Trying to peg your currency to a failing currency is utmost stupid, only the likes of Prem, Chuan and Chavalit did it and failed miserably.

Right on! The weakening of the dollar is years overdue. I hate to see it because my income is in dollars, but it's been obvious for years that the U.S. trade deficit was unsustainable. The dollar stayed strong because Bush (and now Obama) never accepted the need to let it weaken, and because China keeps recycling its dollars into U.S. treasury notes. There are two possible choices -- either the Chinese can increase the value of the renminbi, or the dollar can drop dramatically. Either way the Chinese are going to take a hit, because their huge dollar reserves are going to be worth less, but it's their own fault for using their exchange rate policy to promote mercantilism. Other countries (like Thailand) would be better off if the Chinese increased the exchange rate of the renminbi (or yuan). Another problem for the dollar is the U.S. policy of keeping short term interest rates at zero (long-term rates are also very low) in an effort to restart the economy, so that investors looking for a return are sending their money to places like Thailand, where they can get a better return.

The only way I can think of for the BOT to counter the rise of the baht would be to vastly increase the quantity of baht in circulation -- but that would almost certainly start a ruinous inflation. They can "manage" the fluctuation of the baht on the foreign exchange markets within narrow limits, but they can't just "devalue" the baht, because they exchange rate is not fixed.

[asiawatcher]

How can Thailand survive when the baht is 20 something per dollar

Simple - stop using the US as a base trading currency and let it fall to 25 - who cares? - start using Euro or Aus dollars which are more stable at present. I never understand the fixation of the use of USD when it constitutes a control factor propagated by the Fed! Now therein lies some answers...

[SergeiY]

The article gives the answer what is going on and what is going to happen -

See the positive thing in a strong Baht (and or the weak dollar) work with it and be happy about.

"While admitting negative impacts on some, an economist noted that Thailand gains net benefits from the baht strengthening. ... Totally, benefits are double the size of losses."

- that says it all. Don't waste your time and hope or wait that the government gives you a better deal for your foreign tourist money.

[britmaveric]

^as I predicted - baht is weakening.

[dighambara]

The Baht is strong, nothing in the short run wil stop the appreciation.

However, the biggest importer in Laos is Thailand.

Prices of foodstuff and other products imported from Thailand are getting higher and higher.

A fact the Lao Government brought itself to suggest it would maybe become time to look elsewhere.

Lots of Thai products get more and more expensive, till a certain point will be reached.

Which effectively means that Thai exports will fall down.

And with it the Baht will drop.

Don't wait for it.

Much has already happened - rice production is less profitable, so farmers are moving to other crops, which will overload the market. Thai products, once a hot seller abroad, are now too expensive.

Yep, the Thai Government needs to bite the bullet and devalue the Baht, but not before all the wealthy can get their money to a safe haven...LOL

Edited October 11, 2010 by dighambara

[Thai at Heart]

The Baht is strong, nothing in the short run wil stop the appreciation.

However, the biggest importer in Laos is Thailand.

Prices of foodstuff and other products imported from Thailand are getting higher and higher.

A fact the Lao Government brought itself to suggest it would maybe become time to look elsewhere.

Lots of Thai products get more and more expensive, till a certain point will be reached.

Which effectively means that Thai exports will fall down.

And with it the Baht will drop.

Don't wait for it.

Much has already happened - rice production is less profitable, so farmers are moving to other crops, which will overload the market. Thai products, once a hot seller abroad, are now too expensive.

Yep, the Thai Government needs to bite the bullet and devalue the Baht, but not before all the wealthy can get their money to a safe haven...LOL

And exports rose how much to an all time high of how much last month?

There is more to this than rice exports, and yes, the misguided efforts of successive Thai governments in cahoots with business to chase the non-title of "largest exporter of rice in the world" is to blame. Did the farmers see any real benefit in income from this title, and yet Thailand still tries to chase it when it only benefits about 50 families in Bangkok.

And people wonder why there is bit of an uprising in the countryside to get their government to do something tangible to help them. N.B. Growing more rice is not the answer.

[Unwisemonkey]

hmm maybe I ought to mint my own local currency That should take care of the problem. I'll call it the Farang, and back it with som tum.

[whybother]

Given that the baht is freely traded, how would the government lower the value of the baht?

Dropping interest rates?

Fees on incoming money?

Spending more government money?

Selling more baht?

[mommysboy]

Given that the baht is freely traded, how would the government lower the value of the baht?

Dropping interest rates?

Fees on incoming money?

Spending more government money?

Selling more baht?

Within regard, to the currencies, there is very little Thailand can do. But that masks the real issue.

Why on earth won't they promote domestic consumption, and do what a progressive government is supposed to do.

I'm guessing that just as a select elite gain most benefit from a strong baht, so the same elite benefit just the same from bleeding the poor dry and investing bXXXX all in the domestic economy.

The saddest part is you can see their point, what with the terrible inefficiency and corruption out here.

[mommysboy]

The Baht is strong, nothing in the short run wil stop the appreciation.

However, the biggest importer in Laos is Thailand.

Prices of foodstuff and other products imported from Thailand are getting higher and higher.

A fact the Lao Government brought itself to suggest it would maybe become time to look elsewhere.

Lots of Thai products get more and more expensive, till a certain point will be reached.

Which effectively means that Thai exports will fall down.

And with it the Baht will drop.

Don't wait for it.

Much has already happened - rice production is less profitable, so farmers are moving to other crops, which will overload the market. Thai products, once a hot seller abroad, are now too expensive.

Yep, the Thai Government needs to bite the bullet and devalue the Baht, but not before all the wealthy can get their money to a safe haven...LOL

And exports rose how much to an all time high of how much last month?

There is more to this than rice exports, and yes, the misguided efforts of successive Thai governments in cahoots with business to chase the non-title of "largest exporter of rice in the world" is to blame. Did the farmers see any real benefit in income from this title, and yet Thailand still tries to chase it when it only benefits about 50 families in Bangkok.

And people wonder why there is bit of an uprising in the countryside to get their government to do something tangible to help them. N.B. Growing more rice is not the answer.

Big families!!!! agriculture employs upwards of 10 million people, or rather did.

Yes bit of a head scratcher. Thailand very uncompetitive but exports expanding sharply. Nevertheless, biggest industries up in arms.

In time honoured fashion, bound to ask: what's going on?

[mommysboy]

How can Thailand survive when the baht is 20 something per dollar

Simple - stop using the US as a base trading currency and let it fall to 25 - who cares? - start using Euro or Aus dollars which are more stable at present. I never understand the fixation of the use of USD when it constitutes a control factor propagated by the Fed! Now therein lies some answers...

Hey Gordon The Gecko!!! if you are a 60 something retiree with a pension in US dollars, a US credit card, and pretty much all you own measured in dollars, your suggestion might be just a tad difficult to implement!

[whybother]

Given that the baht is freely traded, how would the government lower the value of the baht?

Dropping interest rates?

Fees on incoming money?

Spending more government money?

Selling more baht?

Within regard, to the currencies, there is very little Thailand can do. But that masks the real issue.

Why on earth won't they promote domestic consumption, and do what a progressive government is supposed to do.

I'm guessing that just as a select elite gain most benefit from a strong baht, so the same elite benefit just the same from bleeding the poor dry and investing bXXXX all in the domestic economy.

The saddest part is you can see their point, what with the terrible inefficiency and corruption out here.

So, what about the $A? The Australian government aren't progressive? Or are the Australian elite gaining from the strength of the $A?

[Tracechain]

How can Thailand survive when the baht is 20 something per dollar

Simple - stop using the US as a base trading currency and let it fall to 25 - who cares? - start using Euro or Aus dollars which are more stable at present. I never understand the fixation of the use of USD when it constitutes a control factor propagated by the Fed! Now therein lies some answers...

Hey Gordon The Gecko!!! if you are a 60 something retiree with a pension in US dollars, a US credit card, and pretty much all you own measured in dollars, your suggestion might be just a tad difficult to implement!

Good point. Does Thai immigration ever lower the retired monthly money amount requirement to off set Baht strength/weakness to USD?

[britmaveric]

^no, if anything they will raise it.

[SergeiY]

How can Thailand survive when the baht is 20 something per dollar

Simple - stop using the US as a base trading currency and let it fall to 25 - who cares? - start using Euro or Aus dollars which are more stable at present. I never understand the fixation of the use of USD when it constitutes a control factor propagated by the Fed! Now therein lies some answers...

Hey Gordon The Gecko!!! if you are a 60 something retiree with a pension in US dollars, a US credit card, and pretty much all you own measured in dollars, your suggestion might be just a tad difficult to implement!

If you are a 60 something retiree with a pension in US dollars, speculate at the exchange into a weak third world currency, but suddenly find out your money isn't enough you should go home. There you will be much less affected by a dollar that goes weaker day by day.

You had 60 years to be prepared for that situation.

Look at the good part of it: Some of them can hope for a second career. working as a bar boygrandpa in some touristy places in America and waiting for young female Asian tourists who have some kind of a fetish and visit bars full with old men. The weak dollar will help to bring these tourists.

Good luck.

[Tracechain]

How can Thailand survive when the baht is 20 something per dollar

Simple - stop using the US as a base trading currency and let it fall to 25 - who cares? - start using Euro or Aus dollars which are more stable at present. I never understand the fixation of the use of USD when it constitutes a control factor propagated by the Fed! Now therein lies some answers...

Hey Gordon The Gecko!!! if you are a 60 something retiree with a pension in US dollars, a US credit card, and pretty much all you own measured in dollars, your suggestion might be just a tad difficult to implement!

If you are a 60 something retiree with a pension in US dollars, speculate at the exchange into a weak third world currency, but suddenly find out your money isn't enough you should go home. There you will be much less affected by a dollar that goes weaker day by day.

You had 60 years to be prepared for that situation.

Look at the good part of it: Some of them can hope for a second career. working as a bar boygrandpa in some touristy places in America and waiting for young female Asian tourists who have some kind of a fetish and visit bars full with old men. The weak dollar will help to bring these tourists.

Good luck.

You know, you are right. I do remember thinking to myself when I was but a young lad of three...I think I'll retire in Thailand. I seem to recall telling my dear ole Pappy that I had better prepare myself in case and have extra monies to cover down on the bleak US economic picture because some prick would certaintly be around to comment. Thank you so much but I think I'll stay. Maybe we can get together sometime and have coffee.

[edgarfriendly]

so gold at 19200 is a safe haven from the impending 'baht plummet'?

hmm.....i was about to sell....

ef

Edited October 12, 2010 by edgarfriendly

[Thai at Heart]

The Baht is strong, nothing in the short run wil stop the appreciation.

However, the biggest importer in Laos is Thailand.

Prices of foodstuff and other products imported from Thailand are getting higher and higher.

A fact the Lao Government brought itself to suggest it would maybe become time to look elsewhere.

Lots of Thai products get more and more expensive, till a certain point will be reached.

Which effectively means that Thai exports will fall down.

And with it the Baht will drop.

Don't wait for it.

Much has already happened - rice production is less profitable, so farmers are moving to other crops, which will overload the market. Thai products, once a hot seller abroad, are now too expensive.

Yep, the Thai Government needs to bite the bullet and devalue the Baht, but not before all the wealthy can get their money to a safe haven...LOL

And exports rose how much to an all time high of how much last month?

There is more to this than rice exports, and yes, the misguided efforts of successive Thai governments in cahoots with business to chase the non-title of "largest exporter of rice in the world" is to blame. Did the farmers see any real benefit in income from this title, and yet Thailand still tries to chase it when it only benefits about 50 families in Bangkok.

And people wonder why there is bit of an uprising in the countryside to get their government to do something tangible to help them. N.B. Growing more rice is not the answer.

Big families!!!! agriculture employs upwards of 10 million people, or rather did.

Yes bit of a head scratcher. Thailand very uncompetitive but exports expanding sharply. Nevertheless, biggest industries up in arms.

In time honoured fashion, bound to ask: what's going on?

The rice export business in Thailand is a con with either the government or the farmer holding all the risk and the exporter virtually none.

Chasing ever increasing production of this product for increased exports is I would debate not in the national interest.

[swerver]

I'm sure the Thai govt will talk and talk and talk and talk and...........about doing something.

Thailand caught between a rock and a hard piece

The New Mode of Global Warfare

“Coming events cast their shadows forward.” – Goethe

What is to stop US banks and their customers from creating $1-trillion, $10-trillion or even $50-trillion on their computer keyboards to buy up all the bonds and stocks in the world, along with all the land and other assets for sale, in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1% interest cost? This is the game that is being played today in 2010. The outflow of dollar credit into foreign markets in pursuit of this strategy has bid up asset prices and foreign currencies, enabling speculators to pay off their US positions in cheaper dollars, keeping for themselves the currency shift as well as the arbitrage interest-rate margin.

- Prof. Michael Hudson

…

Brazil has been more a victim than a beneficiary of what is euphemized as a “capital inflow.” The inflow of foreign money has pushed up the Brazil Real by 4% in just over a month (September 1, 2010 through early October 2010), and the past year’s run-up has eroded the competitiveness of Brazilian exports. To deter the currency’s rise, the government imposed a 4% tax on foreign purchases of its bonds on October 4, 2010. “It’s not only a currency war,” Finance Minister Guido Mantega explained. “It tends to become a trade war and this is our concern.” Thailand’s central bank director Wongwatoo Potirat warned that his country was considering similar taxes and currency trade restrictions to stem the Thai Baht’s rise. Subir Gokarn, deputy governor of the Reserve Bank of India, announced that his country also was reviewing defenses against the “potential threat” of inward capital flows.”

Such inflows do not provide capital for tangible investment. They are predatory, and cause currency fluctuation that disrupts trade patterns while creating enormous trading profits for large financial institutions and their customers. Yet most discussions treat the balance of payments and exchange rates as if they were determined purely by commodity trade and “purchasing power parity,” not by the financial flows and military spending that actually dominate the balance of payments. The reality is that today 2010’s financial interregnum – anarchic “free” markets prior to countries hurriedly putting up their own monetary defenses – provides the arbitrage opportunity of the century. This is what bank lobbyists have been pressing for. It has little to do with the welfare of workers in their own country. …