Central Bank Chief Cautions As Baht Gains Extra Strength

[Naam]

the BoT has watched the currency and believes do nothing is best, Thailand can become the hub for strong currencies and it is good for the country. I for one can not refute this as the west will find out, probably too late.

Might be good for the country as it holds down inflation, but very bad for exports as the strong baht drives up the cost of Thai goods in foreign markets.

Unfortunately a increase in the value of the baht increase the cost of imported products upon which the foreigner relies to maintain the standard of living that he is used too.

an increase of the value of a currency causes exactly the opposite, namely decreasing the cost of imported goods. that of course does not apply to the goods you mentioned because the additional profit is pocketed by the importers.

[Guest]

the BoT has watched the currency and believes do nothing is best, Thailand can become the hub for strong currencies and it is good for the country. I for one can not refute this as the west will find out, probably too late.

Might be good for the country as it holds down inflation, but very bad for exports as the strong baht drives up the cost of Thai goods in foreign markets.

Keeping inflation down? Do you ever buy food ? I think that inflation is around 10-15% / year

I am thinking primarily of staple food, like meat, eggs and milk

I buy food everyday, and have for years in Thailand...same vendors, restaurants...no price change...not one baht. Am I missing something? What food costs more? Not trying to argue, just learn...where is this spike in food cost?

[how241]

the BoT has watched the currency and believes do nothing is best, Thailand can become the hub for strong currencies and it is good for the country. I for one can not refute this as the west will find out, probably too late.

+1

[scotbeve]

the strongest since July 1997

Anything interesting happen at that time?

Not sure if you're being facetious, but it was when the BoT was forced to allow the market to price the Baht exchange rates for lack of foreign currency to support the dollar/baht peg .

But then I suspect you knew that ... although others may not.

Maybe Europe and Japan can use Thailand as a model for the path to recovery of their shambolic economies.

What and go back to building "a strong economy' based on the exploitation of the poorly educated masses with low wages, long hours and a total disregard for health and safety.

There is already still too much corruption in the West, hence the new UK Anti-Bribery legislation (and US). Pity the fraudulent rich bankers and accountants seem above the law.

Yep - can see the parallels already.

1997 = "Thaitanic" and the snowball effect of it.... Except it was the other direction - sigh.....

[a99az]

Got to say I am happy to see the Thai ฿ doing so well as I am about to cash in and return to Europe at the end of the month. When I came here it was 72.8 to the £ now 44 to the £, guess it's going to be a good day to buy £'s and kick back in the UK for a few years.

[metisdead]

Off topic posts and replies have been removed.

[Suradit69]

the strongest since July 1997

Anything interesting happen at that time?

Not sure if you're being facetious, but it was when the BoT was forced to allow the market to price the Baht exchange rates for lack of foreign currency to support the dollar/baht peg .

But then I suspect you knew that ... although others may not.

Maybe Europe and Japan can use Thailand as a model for the path to recovery of their shambolic economies.

Not sure if you are being facetious, but 1997 also marked a period when the yen had depreciated some 50% against the baht in a period of under 2 years. The yen has now depreciated nearly 45% against the baht in just 10 months. The effect of a depreciation of this size is typically for Japanese manufacturers to repatriate a significant amount of production back to Japan. The effect of an economy like Thailand's can be dramatically negative as was the case in 1997, itself 'caused' by multiple factors, but one crucial element was the change in the THB-JPY FX rate.

Not sure in what way you think I'm being facetious. JetSet asked a question, but as I suspected, it was a somewhat loaded question since he clearly knew the answer.

From 1984 to 1997, the Baht was pegged at $1 to 25 baht. It wasn't pegged to the yen, but obviously would have moved with the dollar/yen rate.

When the baht was floated against the dollar, it fell to something like 55 baht to the dollar within six month. Obviously that would have had a similar effect to its exchange rate with other major currencies, including the yen.

The current yen depreciation against the dollar is being orchestrated by the Japanese central bankers. Certainly , as is always true, there were many, many factors at work, not simply the floating of the baht, but that was regarded as a trigger for much of what followed.

The chart below shows the baht/dollar exchange rate with the spike in 1997

Edited April 10, 2013 by Suradit69

[batblaster]

In the last 3 years i lost more than 25% every time i got paid. My customers are in the US and when they pay i get less everytime, is becoming really difficult to live. I must care employers and is almost impossible for me to ask more when i close a contract because due to the problems in the US they won't spend more. I think $ changed to 35 would be very good. For the peoples who speak about tourists, how they can come if their holiday cost double of an holiday in other places ?
Before many peoples came here and spend a lot having also a lot of fun now they spend double for the half of time.

[webfact]

FOREIGN EXCHANGE
Rapid baht appreciation concerns PM
The Nation



BANGKOK: -- Prime Minister Yingluck Shinawatra on Wednesday called for an urgent meeting on the baht movement.

Attending the 2-hour meeting included Bank of Thailand Governor Prasarn Trairatvorakul.

Prasarn said after the meeting that the prime minister is highly concerned about the baht appreciation against US dollar. She has instructed the authorities to closely monitor the situation and devised relief measures for the affected, particularly small and medium-sized enterprises (SMEs).

The governor reiterated that the baht rose "too fast", thus affecting exporters. Commercial banks have been asked to facilitate exporters on several fronts, such as risk management. He also promised a thorough monitoring to find out if there is any irregularity involved with the inflows.

Finance Permanent Secretary Areepong Bhoocha-oom admitted that the baht is on an upward trend.


-- The Nation 2013-04-10

[lee b]

Great news, i'm losing too much money with the exchange rate as it is !!

[sjjmmi]

Her World shopping trip is getting more costly

[timewilltell]

To go back to the topic to some degree, I understand that this is worrying for people outside of Asia-Pacific however the THB has not moved significantly compared to the AUD and NZD or other Asian currencies except the JPY. Which is as expected: the EUR is down because the Eurozone have detonated their economy; the USD and JPY are down because they're printing money. The rest of the currencies don't move much. Bottom line: get out of currencies that are being destroyed by their governments, if you can...

Problem is that is nearly all of the currencies and countries. What amazes me is how bankrupt countries borrow from other bankrupt countries unless there is a whole slew of countries with lots of money to lend it is hard to see where all the money comes from from these countries with huge balance of payments deficits.

Seems to me another financial cliff drop is on the horizon because if it doesn;t seem to add up it probably doesn't. You can hide a lot with fractional reserve banking but eventually the mythical penny will drop.

[Plastic Brontosaurus]

I still think its a case of the dollar depreciating against the baht (and the AUD and NZD and most Asian currencies) rather than the baht appreciating against the dollar...

[Time Traveller]

All very well but they do not take this into consideration when Farangs on retirement /extension still have to produce income of 65,000 baht per month or 800,000 in the savings account if it gets any worse I envisage a lot of expats looking elsewhere other than Thailand

If you had of invested in the Thai stock market 10 or 12 years ago, you wouldn't need to be counting your pennies now.

I remember at the time everyone had such a negative opinion on thai investments. They usually said something about don't invest in thailand more than you can lose - or some variation of that - and now those same people are complaining about their weak foreign money. Oh well there's safety in crowds, even if you are wrong!

[laislica]

All very well but they do not take this into consideration when Farangs on retirement /extension still have to produce income of 65,000 baht per month or 800,000 in the savings account if it gets any worse I envisage a lot of expats looking elsewhere other than Thailand

If you had of invested in the Thai stock market 10 or 12 years ago, you wouldn't need to be counting your pennies now.

I remember at the time everyone had such a negative opinion on thai investments. They usually said something about don't invest in thailand more than you can lose - or some variation of that - and now those same people are complaining about their weak foreign money. Oh well there's safety in crowds, even if you are wrong!

Oh yes, 20/20 Hind Sight is a great thing

[webfact]

FOREIGN EXCHANGE
Baht is just catching up: BOT
The Nation

BANGKOK: -- Despite rapid appreciation, the baht has gained only 2.5 per cent against US dollar in the past month compared to 6.7 per cent in Icelandic Krona and gains in other currencies, said Bank of Thailand assistant governor Chantavarn Sucharitakul.

"Thailand is not alone to face volitility," she said. "In this region, the baht appreciation is milder than that of the Malaysian ringgit. Each country is chewing with its unique factors; for example, South Korea is gripped by tensions in the Koean peninsula and its currency has not risen much."

She reiterated that the baht is just catching up with other regional currencies, which showed higher appreciation in 2012. In the year, the baht gained only 3 per cent, against 6-7 per cent by Korean won and nearly 7 per cent by Philippine peso.

Prime Minister Yingluck Shinawatra on Wednesday called for an urgent meeting on the baht movement.

Attending the 2-hour meeting included Bank of Thailand Governor Prasarn Trairatvorakul.

Prasarn said after the meeting that the prime minister is highly concerned about the baht appreciation against US dollar. She has instructed the authorities to closely monitor the situation and devised relief measures for the affected, particularly small and medium-sized enterprises (SMEs).

The governor reiterated that the baht rose "too fast", thus affecting exporters. Commercial banks have been asked to facilitate exporters on several fronts, such as risk management. He also promised a thorough monitoring to find out if there is any irregularity involved with the inflows.

Finance Permanent Secretary Areepong Bhoocha-oom admitted that the baht is on an upward trend.


-- The Nation 2013-04-10

[Suradit69]

To go back to the topic to some degree, I understand that this is worrying for people outside of Asia-Pacific however the THB has not moved significantly compared to the AUD and NZD or other Asian currencies except the JPY. Which is as expected: the EUR is down because the Eurozone have detonated their economy; the USD and JPY are down because they're printing money. The rest of the currencies don't move much. Bottom line: get out of currencies that are being destroyed by their governments, if you can...

Problem is that is nearly all of the currencies and countries. What amazes me is how bankrupt countries borrow from other bankrupt countries unless there is a whole slew of countries with lots of money to lend it is hard to see where all the money comes from from these countries with huge balance of payments deficits.

Seems to me another financial cliff drop is on the horizon because if it doesn;t seem to add up it probably doesn't. You can hide a lot with fractional reserve banking but eventually the mythical penny will drop.

Much of the US Treasury debt is now held by the US Federal Reserve (hence the printing money comments). They're buying debt currently at the rate of $85 billion a month. In theory that keeps rates low, sends investors into equity and improves liquidity. It's magic! Then at some point they'll need to stop buying debt and start selling it to sop up the liquidity. That will cause even more magic.

The BOJ is buying Japanese debt so that Japanese institutions need to spend their investible yen to buy foreign denominated debt thus driving down the Yen.

Edited April 10, 2013 by Suradit69

[laislica]

I still think its a case of the dollar depreciating against the baht (and the AUD and NZD and most Asian currencies) rather than the baht appreciating against the dollar...

+1 for the good old GBP!

It will probably go down the toilet and be a leader at that!

If only I'd had some spare money a few years ago when I could have got baht in the 70's for a quid rather than be lucky to get 43!

With that spare money I could even have bought Gold!

Oh if only........

Anyone got an old Delorean I can borrow and I can nip back in time......

and whilst I'm there I could ........ (wanders off mumbling, Oh if only.....)

Darn it - I seem to be right out of Flux Capacitors.

[Arkady]

The last set of capital controls introduced by BOT Governor Tarisa, who was allegedly pushed into it by Pridyathorn as finance minister, weren't a great success due to the unintended and unanticipated consequences. Caused the biggest one day drop in the SET ever. Neither of them had a clue about capital markets and both refused to listen to anyone who did. Soon after that Pridyathorn told Thai seminars that foreigners weren't wanted in the Thai stock market anyway as they were all speculators (sour grapes), while at the same time telling foreign investment seminars in English that they were more than welcome.

Let's hope there is no repeat of this type of buggers' muddle by Pu Yai who think they are so Yai that they are unaccountable geniuses. Fortunately BOT Governor Prasarn is a prudent, knowledgeable man, so it is unlikely without interference from the government in favour of exporters.

Edited April 10, 2013 by Arkady

[Arkady]

All very well but they do not take this into consideration when Farangs on retirement /extension still have to produce income of 65,000 baht per month or 800,000 in the savings account if it gets any worse I envisage a lot of expats looking elsewhere other than Thailand

If you had of invested in the Thai stock market 10 or 12 years ago, you wouldn't need to be counting your pennies now.

I remember at the time everyone had such a negative opinion on thai investments. They usually said something about don't invest in thailand more than you can lose - or some variation of that - and now those same people are complaining about their weak foreign money. Oh well there's safety in crowds, even if you are wrong!

Right. I couldn't care less about the sterling or dollar/ baht exchange rates because I transferred what I could to Thailand after the Tom Yam Kung crisis had stabilised but the baht was still around 40 to the dollar. Despite all the warnings, I took my chances to buy house, condo and invest in the SET and am now glad I did it.

[Naam]

The big banks, world-wide, can make billions from the yen "carry trade". That is, borrow one billion in Tokyo at 0.5% (say) and invest in Thailand at 2.5% (say).

Nice easy 2% profit on a billion at the click of a mouse.

I know little about this "easy exchange' and would like to learn more. It does occur to me that borrowing a weak currency to purchase a strong one does seem to be something of a wash...but honestly, would love to learn from you how that works.

there is no such thing like an "easy exchange" and it does not work with a click of a mouse because pocketing the difference of 2% takes a full year, a period during which a lot can happen. because if the "weak" currency improves by 3% you lost 1% of one billion.

there are more ways to benefit from interest rate differentials without actually shelling out a single penny cash. but explaining that would go too far.

[Naam]

the BoT has watched the currency and believes do nothing is best, Thailand can become the hub for strong currencies and it is good for the country. I for one can not refute this as the west will find out, probably too late.

Might be good for the country as it holds down inflation, but very bad for exports as the strong baht drives up the cost of Thai goods in foreign markets.

Keeping inflation down? Do you ever buy food ? I think that inflation is around 10-15% / year

I am thinking primarily of staple food, like meat, eggs and milk

I buy food everyday, and have for years in Thailand...same vendors, restaurants...no price change...not one baht. Am I missing something? What food costs more? Not trying to argue, just learn...where is this spike in food cost?

you get special conditions for being a "hansum" man

[fish fingers]

very soon we'll see an accession and unprecedented turmoil, war etc. Lets see what happens to the baht, property prices, tourism

[mike speakman]

to think of all the english expats thats thousands across the country living on the pound that is transfered over turned into baht i have seen a drop in english people driving there cars they dont eat out as much as they are on a tight bugit and yes many are retired 65 years old many have sold there english homes to be able to live in thailand . i my self feel the pinch . PLEASE BUDDA GIVE US MORE BAHT FOR OUR POUND.

so we can live a normal life again amen.

[Acharn]

the strongest since July 1997

Anything interesting happen at that time?

Yes, and as they say, "it is alright to lose, if you do not lose the lesson." Thailand did learn that if you sleep with dogs, you wake up with fleas, and cut the peg to the US Dollar, and enacted new regulatory and banking practices This lesson has clearly been lost on the Hong Kong Financial Community, who do not seem to understand that they are a dingy tied to a sinking ship.

Time will tell how this all pans out, but I would say this time, Thailand and several SEA countries are this time in the driver's seat, and not a tool for London and New York traders to feed on.

Thailand is in an ideal position to take leadership in the region, and the "flight to quality" that strengthens the Baht, without excessive rates on debt, is a natural and organic expression of confidence and a view of a strong economy in the future.

I like your point very much, and people should really examine which part of the meltdown has been repaired in a way to ensure there is not a repeat performance. The Japanese may want to bait the region to a "race to the bottom" but this time, they will be digging their own grave, have to employ short term interest rate fixes to get out of the tailspin, and at the end of the day, eat their own cold porridge.

Yes, I was here for '97 and I agree the TCB learned its lesson well. Especially how bad it is to turn to the IMF for "help." This time we don't see the kind of property bubble and insider loans that were so obvious back then. Those may come if the baht continues to rise. By the time they collapsed back then the baht had been pegged at 22.5 for several yeats, but the criminality had gotten to be as bad as in the U.S. back in 2006. I've been wondering if this might have had something to do with President Obama's visit to sell the Trans-Pacific Partnership. We know hardly aything about what it actually contains, the U.S. government has been very successful at imposing secrecy, but it is generally believed to be very good for the very wealthy Americans and the largest corporations, especially pharmaceuticals and entertainment, but very bad for the rest of us. Believed to be. I wonder if they will ever be forced to make the agreements public. A weakening of the dollar against other currencies would be in the long-term best interests of the U.S., but might be opposed by the Masters Of The Universe. The suggestion that the rise in the baht is connected to Prime Minister Abe's push to stimulate the Japanese economy makes sense.

[dighambara]

the strongest since July 1997

Anything interesting happen at that time?

Yes, and as they say, "it is alright to lose, if you do not lose the lesson." Thailand did learn that if you sleep with dogs, you wake up with fleas, and cut the peg to the US Dollar, and enacted new regulatory and banking practices This lesson has clearly been lost on the Hong Kong Financial Community, who do not seem to understand that they are a dingy tied to a sinking ship.

Time will tell how this all pans out, but I would say this time, Thailand and several SEA countries are this time in the driver's seat, and not a tool for London and New York traders to feed on.

Thailand is in an ideal position to take leadership in the region, and the "flight to quality" that strengthens the Baht, without excessive rates on debt, is a natural and organic expression of confidence and a view of a strong economy in the future.

I like your point very much, and people should really examine which part of the meltdown has been repaired in a way to ensure there is not a repeat performance. The Japanese may want to bait the region to a "race to the bottom" but this time, they will be digging their own grave, have to employ short term interest rate fixes to get out of the tailspin, and at the end of the day, eat their own cold porridge.

AH HA I see that Soro's involvement has been forgotten and the catastrophe has been minimized with time...

The real problem is that Thailand cannot sell its rice now and the sronger the Baht, the more expensive the rice. This is shown by the government's rice buying scheme, which will support farmers only temporarily.

[SoFarAndNear]

the strongest since July 1997

Anything interesting happen at that time?

Yes, and as they say, "it is alright to lose, if you do not lose the lesson." Thailand did learn that if you sleep with dogs, you wake up with fleas, and cut the peg to the US Dollar, and enacted new regulatory and banking practices This lesson has clearly been lost on the Hong Kong Financial Community, who do not seem to understand that they are a dingy tied to a sinking ship.

Time will tell how this all pans out, but I would say this time, Thailand and several SEA countries are this time in the driver's seat, and not a tool for London and New York traders to feed on.

Thailand is in an ideal position to take leadership in the region, and the "flight to quality" that strengthens the Baht, without excessive rates on debt, is a natural and organic expression of confidence and a view of a strong economy in the future.

I like your point very much, and people should really examine which part of the meltdown has been repaired in a way to ensure there is not a repeat performance. The Japanese may want to bait the region to a "race to the bottom" but this time, they will be digging their own grave, have to employ short term interest rate fixes to get out of the tailspin, and at the end of the day, eat their own cold porridge.

AH HA I see that Soro's involvement has been forgotten and the catastrophe has been minimized with time...

The real problem is that Thailand cannot sell its rice now and the sronger the Baht, the more expensive the rice. This is shown by the government's rice buying scheme, which will support farmers only temporarily.

Exactly, exports, tourism, retirees, and isaan family supporters. Every % the baht is increasing will be heavy impacts..

[khaowong1]

the BoT has watched the currency and believes do nothing is best, Thailand can become the hub for strong currencies and it is good for the country. I for one can not refute this as the west will find out, probably too late.

Except of course, it's probably going to hurt the heck out of exports.. Which is Thailands bread and butter.. Or rice and somtam as the case may be.

[metisdead]

This is a great thread for a conspiracy theory...

Conspiracy theory post removed.

[cigar7]

BOT reserves are $USD177,802,900,000 as at March 29,2013, down from USD$179,095,750,000 as at March 1, 2013. Net Baht reserves are also down.