Info About Thai Baht "speculation"

[Thaiquila]

I keep seeing reports that the Thai government is fighting speculation on the Thai baht (which today the Bangkok Post says will stengthen to 35 per USD in 2004). These may be naive questions, but can someone explain a few things about this:

-- why is the baht different than the Euro, etc, which is freely traded and speculated on world markets?

-- is baht speculation illegal?

-- if not, what measures are taken to discourage it?

-- is there a legal, low overhead way for someone not living in Thailand to legally speculate in baht movement without just opening an account in Thailand with lots of baht (which I understand you need a visa for)?

If people have specific information about this, it would be interesting. Mere musing and guessing would not be. If I have raised a taboo topic, so be it, it was not intentional.

[dr_Pat_Pong]

It might be due more to a general softening of the $US Thaiquila.

[Pink Mist]

AUD$ 1.00 will get you a bees dick over 30 baht it has gone up ever so slightly since this morning.

[TRIPxCORE]

-- why is the baht different than the Euro, etc, which is freely traded and speculated on world markets?

The Baht is not different as it is able to be traded openly on the world market. It is not pegged to a major currency like the Hong Kong Dollar, Chinese Yuan, or Malaysian Ringgit. The difference is, the Thai government does put stricter controls on money coming into or out of Thailand and being exchanged for Thai Baht for fear of another crises like back in 1997-98.

-- is baht speculation illegal?

It is not illegal, you just have to find another avenue with which to do your speculating. Look elsewhere in the world for opportunities to invest in currencies. I do it.

-- if not, what measures are taken to discourage it?

Strict controls by the Thai government.

-- is there a legal, low overhead way for someone not living in Thailand to legally speculate in baht movement without just opening an account in Thailand with lots of baht (which I understand you need a visa for)?

Yes! What you need to do is locate an investment firm or bank that lets you trade currencies. There are many in Europe. I believe that there are some banks in Singapore that will let you open Thai Baht accounts so you dont need to worry about Thai government restrictions. Also, there are many firms on the internet where you can open a currency trading account that is similar to a stock trading account such as "E-Trade or Charles Schwab." The only problem with opening an account with a European or Singapore bank is they wont give you the time of day if you dont have a lot of money. Possibly $30,000 US or more.

[Butterfly]

I keep seeing reports that the Thai government is fighting speculation on the Thai baht (which today the Bangkok Post says will stengthen to 35 per USD in 2004).

well, Thaksin is doing the same mistake as in 1996 when Shavawit (sp?) was in power.

First, you have a dollar that is crashing (not good) but even with other currencies you had an appreciation the Thai Bath in the last 6 months.

I think what the BangkokPost was saying was that there are international traders on the forex "playing" with the Thai Bath.

In 1996, the Thai government tried to fight those forex speculators because they were dumping the Thai Bath like crazy, until the Bank of Thailand went broke and stopped defending the Thai Bath. That lead to the Thai Bath devaluation and then the 1997 Asian flu we saw then.

Will this happen again ? not sure. But if the Thai Bath is being attacked by forex traders, then this is BIG BAD NEWS for Thailand. This is a 1997 scenario again. Currently the Thai Bath is under the "illusion" of being strong, but it is "overvalued" already. It should be 50 to $1 and 60 to 1 Euro

If it had to become 35 to $1 it will surely hurt export, something the Thais can't afford if they want to keep the current "growth".

[singa-traz]

I thought the PM would prefer to see the THB exchange rate at 1US$=40THB rather than 1 US$=36THB.

Same situation as 1997 ... what about external dept for Thailand ?

The fact that Thailand had a high level of Short Term External Dept in US$ was the reason the BOT defended the Baht the way they did it ...

What happen to the property bubble which was going to explode anytime ... you forget to mention it ?

[Butterfly]

What happen to the property bubble which was going to explode anytime ... you forget to mention it ?

I am not sure I am following you here.... we are talking currencies, not real estate

[en184]

WWW.SAXOBANK.COM

You can speculate on thaibhat using futures.

[TRIPxCORE]

Will this happen again ? not sure. But if the Thai Bath is being attacked by forex traders, then this is BIG BAD NEWS for Thailand. This is a 1997 scenario again. Currently the Thai Bath is under the "illusion" of being strong, but it is "overvalued" already. It should be 50 to $1 and 60 to 1 Euro

50 to 1 USD and 60 to 1 EUR? Please tell me how you deduced these valuations.

[Butterfly]

Will this happen again ? not sure. But if the Thai Bath is being attacked by forex traders, then this is BIG BAD NEWS for Thailand. This is a 1997 scenario again. Currently the Thai Bath is under the "illusion" of being strong, but it is "overvalued" already. It should be 50 to $1 and 60 to 1 Euro

50 to 1 USD and 60 to 1 EUR? Please tell me how you deduced these valuations.

Inflation maybe or the general rise of prices for the last 5 years ?

Do you know what correlation is ?

[davidm]

The baht has appreciated against the dollar because the US currency has weakened as part of an unofficial government policy. All other things being equal, the baht will continue to appreciate slightly in 2004.

However, the baht has not strengthened against most other major currencies, so exports to Europe and Japan will not be affected.

Speculation against the baht will make you very unpopular if the government discovers your activities.

[TRIPxCORE]

Do you know what correlation is ?

Yes I do know what it is. My question was how did that one specific individual come up with those valuations? I am not saying he's dead wrong, I am just curious.

[Butterfly]

Do you know what correlation is ?

Yes I do know what it is. My question was how did that one specific individual come up with those valuations? I am not saying he's dead wrong, I am just curious.

well, there is strong correlation between inflation and currency devaluation when growth is flat or negative.

In the case of Thai Bath, general prices have increased by more than 100% so with everything being equal using 1996 as the peak, Thai Bath should be 50 to $1 since back then it was 25 to $1

Today with Thai Bath of 40 for $1 you only get 20 bath to $1 in 1996 terms for no real reasons.

I am sure a lot of forex speculators have seen this discrepancy and are or will be attacking the Thai Bath. It all depends on how strong is the Bank of Thailand for defending the currency

[Bob Chittie]

Will this happen again ? not sure. But if the Thai Bath is being attacked by forex traders, then this is BIG BAD NEWS for Thailand. This is a 1997 scenario again. Currently the Thai Bath is under the "illusion" of being strong, but it is "overvalued" already. It should be 50 to $1 and 60 to 1 Euro

Any chance of it actually going to 50 to the dollar? Seems to be the general consensus that it is going the other way.

[Butterfly]

Will this happen again ? not sure. But if the Thai Bath is being attacked by forex traders, then this is BIG BAD NEWS for Thailand. This is a 1997 scenario again. Currently the Thai Bath is under the "illusion" of being strong, but it is "overvalued" already. It should be 50 to $1 and 60 to 1 Euro

Any chance of it actually going to 50 to the dollar? Seems to be the general consensus that it is going the other way.

Not for the short term at least. Could take a while for the real rate to adjust. I am pretty sure it could hit 36 bath to $1

This is going to hurt export big time and next year Earnings are going to be killed. By then the SET will probably be 1000, and you can be sure as shit, that I won't be around in that market.

[Thaiquila]

As far as the baht movement, the consensus in Thailand and abroad is that the baht will strengthen versus the dollar.

The US has had a weak dollar policy (which the Bush people call a "strong dollar policy") for quite sometime. Look at the dollar-euro trend.

This weak dollar policy (combined with historically low interest rates) is in effect to stimulate the dometic US economy, to lower the price of importing US products abroad, to stimulate the stock market (which is working) and job growth (which has not worked).

There is every indication that this weak dollar policy will continue at least for the duration of 2004 as this is an election year. If Bush can get the US job creation machine running, his reelection is practically definite.

It also seems as if the Thai government is trying to stabilize the rise of the baht against the dollar to protect their exports and jobs (as the US is Thailand's leading trading partner). So you could presume if there weren't Thai government efforts the dollar would be falling even more and even faster.

However, this is all conventional information. You could always be a contrarian and think the baht will drop against the dollar in 2004. I am often a contrarian type of person, but I don't think it makes sense in this case.

[shemmy]

Not for the short term at least. Could take a while for the real rate to adjust. I am pretty sure it could hit 36 bath to $1

This is going to hurt export big time and next year Earnings are going to be killed. By then the SET will probably be 1000, and you can be sure as shit, that I won't be around in that market. ................................................................................

................................Butterfly I assume your indicating that at 1000 there is a huge bubble?But wasn't the market at 1200 and something before the crash.I'm in the market what do you sugest my strategy should be in 2004.Also isn't Japan thailand biggest trading partner,I know the largest percentage of forgien investment in Thailand is japanese............

[Thaiquila]

Ooops, I stand corrected. Yes, now I think Japan is Thailand's leading trading partner based on this very interesting article.

http://taiwansecurity.org/WP/2003/WP-151103.htm

which also provides a view of the increasing influence of China in the Asian region, taking the opportunity to capitalize on negative international feelings about the US.

[derek]

Speculating on currencies like the Baht is called "Exotics." Generally, you would need a rather substantial account at a brokerage house to do this. It is cheap and easy to do the same currency speculation on "majors" (dollar, pound-cable, Euro, Swiss, Yen). I was once quoted 250,000 dollars to start an account speculation on the baht. Too much for me to use for speculating.

If you want to speculate on currencies, be extremely conservative. This means only bet 10 to 1 at the most. Also, I believe it would be in your interest to bet against the dollar for the short-term. Look at the tables over the past couple of years of the dollar versus the Yen, Euro, Gold, Euro, and other European currencies. Also, think about selling the Mexican peso, although it is an exotic, it might be easier to work with than the Baht.

http://fx.sauder.ubc.ca/plot.html

The Baht has had a good run versus the dollar for a while. From 44 to the present 39.8

But, since GW 2 took over in the White House, most of the world's currencies ex-Mexico have had a field day against the dollar. So, the Baht has actually dropped against these currencies over the past two years.

The Government here is supposed to keep the currency stable on a trade-weighted and intestment-weighted basis. I do not know the current trade-weights or invest-weights of the Euro countries, the non-Euro European countries, Japan, etc., but those countries have not changed their trade numbers versus the US, with Thailand anything near the amout that their currencies have changed.

The country is not suffering a trade gap...like the US, nor is it currently bathing in short-term foreign debt(although there is a lot of foreign money in the stock market- like mine). I do not see any current reason for the baht to fall against the dollar. It has the advantage of having fallen much of the way with the dollar for quite some time now.

[Thaiquila]

This article presents an interesting theory about why Asian countries (presumably Thailand included, but mostly China) are keeping the dollar artificially strong against the Asian currencies (while hoarding cheaper dollars). The theory is the dollar crisis (versus the Asian currencies) will occur sometime later down the road, not right away.

http://www.washingtonpost.com/wp-dyn/artic...0-2004Jan5.html

[Khun ?]

Thailand and Singapore are reported to start dumping today to keep their value

low. Europe is going to start hurting soon. They better start lower interest rates soon, economies will be slow if any growth at all.

[Butterfly]

This article presents an interesting theory about why Asian countries (presumably Thailand included, but mostly China) are keeping the dollar artificially strong against the Asian currencies (while hoarding cheaper dollars). The theory is the dollar crisis (versus the Asian currencies) will occur sometime later down the road, not right away.

http://www.washingtonpost.com/wp-dyn/artic...0-2004Jan5.html

I wouldn't be surprised by such a move. Payback time for the 1997 flu ? I think so.

The US has only the OIL to keep its float of dollars moving. That's their collateral. But now some countries want to use the Euro for trading oil.

After all the scandals of the last 5 years (much worse than the Asian crisis in my book), I am surprised that the US is still holding up with the low currency and huge debt. But again, who want to see the US falls ? they couldn't borrow from the IMF without breaking all the banks and all other western countries in the process

Maybe the Euro deserve to replace the dollar after all. It's becoming a major currency for sure

[Expat2B]

The Financial Times reported today that the dollar probably has a further 13% to fall before it starts hitting its long term floor (previously against the Deutschmark, in the pre-Euro days). Their opinion, which I subscribe to is that the dollar looks like being weak for the next 5-10 years, since it has been heavily overvalued in recent years.

The US Government seems quite content to let it fall and stimulate export demand, and empirical evidence (e.g. last months trade figures) shows that this is working.

Given the shape of the Japanese economy, the Japanese Yen really needs to track the changes in dollar value if Japanese goods (e.g. Cars, electronics etc.) are to remain competitive in their principal export market. Since many currencies are in fact pegged to the dollar (e.g. China and HK) they will automatically follow the dollar downwards. The Thai government will have little choice but to follow the general trend and retain their current exchange rate with the dollar, in fact the BOT has publically stated that they feel an appropriate exchange rate is 45 baht to the dollar. The alternative would be to become increasingly uncompetitive with chinese exports into the US (not an attractive proposition for Thailand).

This will mean (and maybe this is wishful thinking on my part) that there is significant room for the baht to depreciate further against both the Euro and sterling. I would be betting on it hitting at least 85 baht to the pound before the slide stops. This all could be an elaborate ploy by the US to effectively force a revaluation of the Yuan and similar currencies (which the US is also on public record as deeming to be desirable). In which case other asian currencies will see less pressure to track the dollar downwards (unless they wish to seize import opportunities into the US, gaining market share from the Chinese).

Let us also not forget that it was the weak dollar in 1997 which was at least partly to blame for precipitating the baht devaluation. I would be exceptionally wary of holding large quantities of baht with such an uncertain macroeconomic outlook (and against a trend of a weakening baht relative to major currencies excluding the dollar).

It is a fact that governements start bemoaning the damage that "currency speculators" are doing when they do not like the way in which market forces are pushing their respective national currencies. However in the long term the speculators tend to be working on behalf of the market by prompting sensible realignment of exchange rates (e.g. the £ devaluation against the then Ecu, prompting its exist from the ERM).

All in I think (or is that I hope) it is looking like being a very good time for Europeans to move to LOS.