Baht likely to remain stable

THE NATION

BANGKOK: -- The Bank of Thailand has expressed concern that the United States' "fiscal cliff" crisis could make the baht volatile, but believes that in the long term the currency will likely remain stable thanks to Thai direct investment.

Pongpen Ruengvirayudh, deputy BOT governor for monetary stability, lamented the lack of clarity over what the US was doing to avoid a potentially damaging range of tax increases and spending cuts that could automatically kick in next month under a prior agreement to rein in Washington's fiscal deficit.

"People are watching the developments, which are always in flux," Pongpen said yesterday. "Initially, there seemed to be good and fast agreement, but it was not like that later. This issue is a major factor for short-term capital movement."

The baht has not been fluctuating much on relatively balanced capital flows, but the central bank is watching for any impact from the fiscal cliff that could make the unit wobbly in the short term, she said.

In the long term, capital flows are expected to balance out. Foreign investors have been net sellers of the baht while Thai investors have been net |buyers.

In the wake of the Monetary Policy Committee's decision to hold the benchmark interest rate at 2.75 per cent, the money market moved in a normal direction as the decision was expected, Pongpen said.

According to the central bank, the global economic situation recently improved, and that allowed appreciation of the baht from midyear. Between November 1 and 23, the baht was up 2.66 per cent from the end of last year.

"The baht has remained relatively unchanged at 30.60-30.80 per US dollar from October 1 to November 23 mainly on overseas economic and financial situations and investor confidence in the global markets," she said.

October's nominal effective exchange rate strengthened slightly by 0.81 per cent from the previous month on the back of weakening major currencies, particularly the Japanese yen and the US dollar.

The real effective exchange rate gained 0.37 per cent in September.

-- The Nation 2012-12-06

With the unbacked USD holding up despite enormous debt the US Govt at this point, has no chance of retiring, the THB seems to (artificially) ride with it. Hovering between 30-31 unless the US starts fielding the massive reserves in oil it has already identified as larger than the Saudi and Middle East deposits to strengthen its economy, the THB will stay with the USD at this exchange rate. The THB however is remaining high due to the weakness of offshore currencies, not by its own strength. If Euro and US turn around the THB will drop and money will again flow into Thailand as a more cost effective country. We live in hope as it affects my industry, the sooner the Baht drops the happier I will be. Getting the USD back to 37+ as when I arrived will put a smile on a lot of peoples faces I know of.

And next month the BOT will have its next prediction on the baht's direction based on past events, their crystal ball, and their ouigi board....and maybe a flip of the coin which may stand on edge.

A drop in the THB would see airfares increase, and the cost of imports increase. Imagine the crisis that would arise when the price of Heinz baked beans edged up 5 baht. More importantly, the cost of petrol would increase since Thailand is dependent upon energy imports. This would cause an increase in costs in all major commercial sectors from agriculture, to manufacturing. Yes, some things might be relatively cheaper, but the savings would be offset by the price increases on key product items. Up or down 5 baht to the $/Euro won't impact most people.

A drop in the THB would see airfares increase, and the cost of imports increase. Imagine the crisis that would arise when the price of Heinz baked beans edged up 5 baht. More importantly, the cost of petrol would increase since Thailand is dependent upon energy imports. This would cause an increase in costs in all major commercial sectors from agriculture, to manufacturing. Yes, some things might be relatively cheaper, but the savings would be offset by the price increases on key product items. Up or down 5 baht to the $/Euro won't impact most people.

If the $US/Euro/£ devalued by 16% against the baht I think it would make a big diffeerence to a lot of people. Although it would theoretically make imports cheaper I don't see most prices going down by that amount especially for things like rent, food, beer, women etc (and I personally could not give a monkey's about baked beans - Heinz or otherwise ) but you would still pay out the same amount in baht.

I use 25 bht to the dollar as a rule of thumb.Anything above that is cream on the top to me.

History is clear, predicting the future is not.

I remember the days of the 1997 crash. 60 baht to the dollar! Actually would like to see that again, but not likely.

I remember the days of the 1997 crash. 60 baht to the dollar! Actually would like to see that again, but not likely.

I remember the days of 1968. 25 baht to the dollar.

I use 25 bht to the dollar as a rule of thumb.Anything above that is cream on the top to me.

History is clear, predicting the future is not.

I am not certain exactly what you are trying to say. But it sounds as though you think that the value of the Thai Baht is the same as it was at some point in the past. And aren't you sort of contridicting yourself? It sounds as though you are predicting the future by past performance.

I remember the days of the 1997 crash. 60 baht to the dollar! Actually would like to see that again, but not likely.

I remember the days of 1968. 25 baht to the dollar.

I started coming to Thailand in 1985 and it was 25 Baht to the dollar and rubber stamped at the same rate for a few years

Fiscal Cliff, thats President Umbongos media backers creating a scare so the financially illiterates who voted for him can keep on getting their bribes and the lifestyle they believe they deserve at the expense of the future generations.

I remember the days of the 1997 crash. 60 baht to the dollar! Actually would like to see that again, but not likely.

I remember the days of 1968. 25 baht to the dollar.

I remember approx 20 baht to the dollar in 1973 when I first visited Thailand for a few years while in the military...and 20 baht in the early 70's definitely bought more than 20 baht buys nowdays. A partial quote from wikipedia on the Thai baht. Link

From 1956 until 1973, the baht was pegged to the U.S. dollar at an exchange rate of 20.8 baht = one dollar and at 20 baht = 1 dollar until 1978. A strengthening US economy caused Thailand to re-peg its currency at 25 to the dollar from 1984 until July 2, 1997, when the country was stung by the Asian financial crisis. The baht was floated and halved in value, reaching its lowest rate of 56 to the dollar in January 1998. It has since risen to about 30 per dollar.

Fiscal Cliff, thats President Umbongos media backers creating a scare so the financially illiterates who voted for him can keep on getting their bribes and the lifestyle they believe they deserve at the expense of the future generations.

How is President Obama's administration budget decisions related to this discussion? It is not the President's "media backers" responsible for the fiscal cliff crisis in the USA. You do realize that that the issue relates to allowing tax cuts that were supposed to be temporary to remain temporary? The Obama administration position isn't causing the THB to remain strong against world currencies such as the Rimbat yuan or Euro. Ask the Chinese to stop playing with their currency, and ask the EU to get its fiscal house in order. Also tell Australia and Canada to stop managing their economies so well.

I remember the days of the 1997 crash. 60 baht to the dollar! Actually would like to see that again, but not likely.

I believe the highest officially recorded rate was 52.4 in late Dec 1997.

What a Low bath mean on detail, for thai economy?

When millions of tourist can buy more and spend more money , when the bath go down 20 procent, why should this bad for the country?

More tourists will come, when 1€ is 50 Thb , and the tourism industries grows up, or are all exports from Thailand realy stronger and have more value of loose, when the bath go down ? Then the billions of bath tourists from all over the world bring into the country I don't believe!

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With QEx scheduled for both sides of the pond during 2013, it's difficult to see how the Baht can continue to trade in its present range, unless of course the BOT wants to spend large amounts in trying to weaken it, doubtful methinks, more probable we'll see an interest rate increase before mid year.