Foreign Exchange: More Calls For Action On Thai Baht

[webfact]

FOREIGN EXCHANGE
More calls for action on Baht
Business Reporters
The Nation



Bank of Thailand's former chairman says BOT should buy more dollars

BANGKOK: -- The Bank of Thailand is widely expected to take action soon to rein appreciation of the baht as its "excessive" gain is having a widespread negative impact on the export sector as well as the government's tax revenue.

Markets are braced for the action. Touching a new 16-year high yesterday with a 0.18 per cent rise from Friday's closing to 25.58 per US dollar, the baht later lost 0.2 per cent to 28.74 at 3.12pm. So far this month, the baht has gained more than 2 per cent against the dollar and 8 per cent over the Japanese yen, making Thai goods more expensive in the countries where trade is denominated in the two currencies.

Pakorn Peetathawatchai, Stock Exchange of Thailand’s executive vice-president, yesterday recommended investors to closely monitor exchange rates, saying that there could be capital controls due to the baht's excessive gain.

"It remains to be seen how the authorities will act to control the hot money. We can't afford to take no action. We have never witnessed the baht appreciate this quickly, or the sharp rise in the stock market like this," Pakorn said.

In the first quarter, the SET index gained 12.15 per cent, making it the world's best-performing market after Vietnam (18.7 per cent), the Philippines (17.1 per cent), Laos (15.9 per cent) and Indonesia (14.5 per cent). Overseas investors bought US$2 billion more Thai sovereign debt than they sold this month through to April 19, adding to net purchases of $9.8 billion in the first quarter.

To stem the baht's appreciation, former Bank of Thailand chairman MR Chatu Mongol Sonakul urged the central bank to buy more dollars, rather than cut the policy rate.

Speaking on the sidelines of a seminar yesterday, Chatu Mongol said that it is necessary to take care of the export sector, which is suffering acutely. He said he understood that financial stability is the BOT's priority, but it should also pay attention to economic progress.

He noted that heavier sterilisation - the buying of US dollars to depress the baht's price - would boost the BOT's accounting loss, but said that's just a figure. China's central bank has also accumulated more than $3 trillion in foreign currencies to stabilise the yuan. With reserves of more than $200 million - 60 per cent of gross national product (GNP), the BOT has the capacity to strengthen its sterilisation efforts, Chatu Mongol said.

He strongly opposed a cut in the policy rate, as suggested by Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong and exporters, saying that could spur consumption and hence inflation.

"It's better for the central bank to shoulder the sterilisation cost than to cut the rate, as higher inflation would affect the entire country," he said.

Foreseeing continued inflows of foreign capital, he noted that it was time to allocate some foreign reserves to finance a sovereign wealth fund, as the fund's overseas investment would counter capital inflows.

Hurting revenues

While saying that the baht's rise is too fast, Paiboon Kittisrikangwan, an assistant governor of the Bank of Thailand, was adamant that BOT had policy options in hand. Yet, for now, it wants to observe market reactions and assess the necessity of measures.

On Friday, the Commerce Ministry, which still maintains this year's export target at 8 to 9 per cent, will hold a discussion with exporters. The Thai Frozen Foods Association earlier estimated that its producers will lose Bt20 billion for every Bt1 increase in the baht against the dollar. The association is fretting that it may fail to achieve its revenue target of Bt1 trillion this year.

The strong baht is also now expected to hurt the government's revenue projections.

Wanee Thasanamontien, principal adviser on tax strategies, said that export-oriented companies in particular will see a sharp decline in revenue when dollar-denominated income is converted to baht. With lower profits, the companies will also pay lower income taxes.

Meanwhile, the stronger baht would make dollar-denominated imports cheaper. The Revenue Department, which collects taxes according to CIF (cost, insurance and freight) rates, will then collect a smaller amount of tax.

This will further lessen the department's revenue, as the corporate income tax cut to 20 per cent this year would slash annual revenue by another Bt80 billion. Wanee estimated that if corporate earnings show annualised growth by 25 per cent or more, this would compensate for the missing revenue. The department aims to collect Bt1.77 trillion this fiscal year.


-- The Nation 2013-04-23

[webfact]

FTI urges for state measures to tackle foreign capital influx & ease baht appreciation

BANGKOK, 23 April 2013 (NNT) – The Federation of Thai Industries (FTI) is urging the government to introduce more measures to curb the influx of foreign capital and to ease the appreciation of the baht.

FTI Secretary-General and acting President Thanit Sorat, on Monday, commented on the issue of strong baht and stated the Thai currency has appreciated 7-8 percent since the beginning of the year.

Mr. Thanit said the appreciation has particularly affected SME operators, whose production mostly demands local materials, and the agro-industrial sector.

He added that the continued strengthening of the baht has been evident as the impact of the 300-baht minimum wage policy remains to be alleviated.

Therefore, the FTI is urging the Bank of Thailand (BoT) and the Finance Ministry to work together in stabilizing the value of the local currency, which now trades at 28.67 baht per one US dollar.

Mr. Thanit said he will submit an official letter to the Deputy Prime Minister in charge of economy and the BoT governor to consider issuing measures to control fund movement.

He stated that tax collection for short-term speculative funds and the downward adjustment of the country’s benchmark interest rate from 2.75 percent to 2.00 percent could be effective measures.

The FTI Secretary-General also noted that the mechanism to allow SME operators access to the exchange risk insurance should also be considered.


-- NNT 2013-04-23

[15Peter20]

So now we've got the SET chief executive and the FTI both saying the Baht should be reigned in. How long can the BOT stay out of it and what are the potential risks involved if they continue to do nothing? Cheers.

Edited April 23, 2013 by 15Peter20

[asiamaster]

"0.18 per cent rise from Friday's closing to 25.58 per US dollar, the baht later lost 0.2 per cent to 28.74 at 3.12pm"

I know the Thais are not good in math but this does not make sense to me.....

[mrwallettt]

If BOT doesn't do something to control the exchange rate they will strengthen themselves right out of an economic boom. More and more industrial and economic influxes will start to out flux with a big whooshing sound as the baht drops like a hot potato!!!!!!!!!

[blazes]

"0.18 per cent rise from Friday's closing to 25.58 per US dollar, the baht later lost 0.2 per cent to 28.74 at 3.12pm"

I know the Thais are not good in math but this does not make sense to me.....

Misprint (what's new?)

[blazes]

All this appreciation has nothing to do with the economy of Thailand as such. It is the result of fat cat Wall Street GordonGeckos moving billions of dollars around Asia, borrowing dollars in NY at 0.25% interest and then buying Thai (Philippine, Vietnamese etc etc) bonds at the healthy going rate of 3+%. Nice profit of 2.75% (at least) on a billion dollars, if you can get it.

Then the "experts" who creepy-crawly on to CNBC or some other arm of the Ministry of Propaganda solemnly declare how emerging markets are where your money should now be. So, all the sheeple move their money into the Thai stock market, where Gecko has only last week bought a billion dollarsworth of shares to push up the index even more, and now, hey presto, time to take the money out again.

Lots of ways to make money (if you already have it).

[diggledunc]

Have I got this wrong. I thought a lot of the inflows of foreign currency were due to government borrowing. If the government borrows more it has to service that debt at higher rates than other more usual places like UK, US Europe. Hence the appeal of buying.

What is the effect:-

Depresses exports, can increase imports

Rubber traded in Yen which means less baht from sales of rubber

Rice traded in US$ so less baht for exports and receipts moving even further away from the price pledged to farmers. Bigger loss more debt.

Western tourists thinking twice about coming because of the exchange rate.

Probably many more!!!!

Is part of the answer not for the government to stop borrowing.

[Suradit69]

"0.18 per cent rise from Friday's closing to 25.58 per US dollar, the baht later lost 0.2 per cent to 28.74 at 3.12pm"

I know the Thais are not good in math but this does not make sense to me.....

Most likely a typo. Probably Baht 28.58 to 28.74 ... still not quite right, but closer.

"the Thais are not good in math "

"the Thais" includes 69 million people including those doing research in this small sampling of universities. I supposed based on this I could make an equally invalid generalization as say "the Thais" must be great at maths.

The list of universities with significant research activities in mathematics

Burapha University: Fixed point theory and applications, Numerical analysis, Mathematical modeling, Partial difference equations, Statistics

Chiangmai University: Functional analysis, Banach spaces theory, Fixed point theory and Applications, Distribution theory, Complex analysis, Control theory, C* Algebra, Operator theory, Ring and module theory, Semigroups, Combinatorics and Graph theory, Algebraic graph theory, Optimization, Mathematical modeling, Universal algebras.

Chulalongkorn University : Algebraic Semigroup theory, Bio-informatics, Coding theory, Combinatorics and graph theory, Fixed point theory, Fluid mechanics, Functional analysis, -structure theory, Geometry, Hyperstructure theory, Mathematical logic and set theory, Number theory, Numerical analysis, Operations research, Partial differential equations, Probability theory and stochastic analysis, Ring theory, Topology, Wavelet theory.

Kasetsart University : Algebra, Number theory, Financial mathematics, Fluid dynamics, classical analysis.

Khon Kaen University : Functional analysis, Universal algebra, Probability theory, Number theory, Numerical analysis, Graph and combinatorics, Fixed-point theory and Semigroups.

King Mongkut's Institute of Technology Ladkrabang : Partial differential equation, Nonlinear ordinary differential equation, Integral equation, Differential geometry, Calculus of variation, Mathematical modelling, Optimization, Supply chain logistics, Global optimization, Environmental model, Dynamical systems, Numerical analysis, Finite element method, Finite difference method, Flow analysis, Polymer processing, Data analysis, Applied mathematics for medical science, Nonlinear functional analysis, Special function, Spectrum theory, Graph theory, Topology, Real and Complex analysis, Set theory, Rough sets, Linear algebra, Transformation semigroups, Matrix theory, Operator theory, Vector analysis



Edited April 23, 2013 by Suradit69

[Joe Mamma]

Back in 99, the exchange was 52 baht to US dollar. Now it is less than half? Bitcoins anyone??

[Lite Beer]

Potential layoffs if Thai baht touches Bt27 / US dollar: Survey.
By English News

BANGKOK, April 23-A number of Thai entrepreneurs fear they may need to lay off employees if the baht strengthens to 27-27.90 against the US dollar, according to a survey by the University of the Thai Chamber of Commerce (UTCC).

UTCC Business Forecasting Centre director Thanawat Polvichai released the survey result from among entrepreneurs nationwide on possible negative impacts from the baht which is hovering around Bt28.80-29.10 against the greenback.

According to the survey, 38.1 per cent said the current rate is moderately appropriate, while one in three said the current rate is definitely not appropriate.

Moreover, 42.1 per cent of respondents said the current exchange rate undermined their businesses regarding competitiveness and exports.

Nearly one fourth - 23.8 per cent - said it could cause a drop in exports.

Most entrepreneurs surveyed said the proper currency exchange rate should remain around Bt30.48 per dollar. The strengthening of the baht to 29.18 is acceptable but if it rises further to 27-27.90, more than 12 per cent said they will have no choice but to lay off employees and 9.8 per cent said they have to close their businesses.

The government should intervene to prevent the baht from a rapid appreciation and manage the unit to stay between Bt29-30 per US dollar, according to those surveyed.

The Bank of Thailand has also been urged to cut money exchange fees and find sources to offer soft loans for help those affected, or the bank should cut interest rate and rein in foreign capital inflows. (MCOT online news).

-- TNA 2013-04-23

[Joe Mamma]

All this appreciation has nothing to do with the economy of Thailand as such. It is the result of fat cat Wall Street GordonGeckos moving billions of dollars around Asia, borrowing dollars in NY at 0.25% interest and then buying Thai (Philippine, Vietnamese etc etc) bonds at the healthy going rate of 3+%. Nice profit of 2.75% (at least) on a billion dollars, if you can get it.

Then the "experts" who creepy-crawly on to CNBC or some other arm of the Ministry of Propaganda solemnly declare how emerging markets are where your money should now be. So, all the sheeple move their money into the Thai stock market, where Gecko has only last week bought a billion dollarsworth of shares to push up the index even more, and now, hey presto, time to take the money out again.

Lots of ways to make money (if you already have it).

So true. Imagine working global markets and your very actions manipulate the favorable outcome. If only the masses themselves could cooperate on a massive level and put the sting on the fat cats.!

[Naam]

oh these wicked Gordon Geckos!

[poanoi]

Why buy US dollar ?

wouldn't Australian dollar be a better bet ? or Norwegian krone ?

or even gold for that matter ?

[Gassit]

"0.18 per cent rise from Friday's closing to 25.58 per US dollar, the baht later lost 0.2 per cent to 28.74 at 3.12pm"

I know the Thais are not good in math but this does not make sense to me.....

Most likely a typo. Probably Baht 28.58 to 28.74 ... still not quite right, but closer.

"the Thais are not good in math "

"the Thais" includes 69 million people including those doing research in this small sampling of universities. I supposed based on this I could make an equally invalid generalization as say "the Thais" must be great at maths.

>The list of universities with significant research activities in mathematics

Burapha University: Fixed point theory and applications, Numerical analysis, Mathematical modeling, Partial difference equations, Statistics

Chiangmai University: Functional analysis, Banach spaces theory, Fixed point theory and Applications, Distribution theory, Complex analysis, Control theory, C* Algebra, Operator theory, Ring and module theory, Semigroups, Combinatorics and Graph theory, Algebraic graph theory, Optimization, Mathematical modeling, Universal algebras.

Chulalongkorn University : Algebraic Semigroup theory, Bio-informatics, Coding theory, Combinatorics and graph theory, Fixed point theory, Fluid mechanics, Functional analysis, -structure theory, Geometry, Hyperstructure theory, Mathematical logic and set theory, Number theory, Numerical analysis, Operations research, Partial differential equations, Probability theory and stochastic analysis, Ring theory, Topology, Wavelet theory.

Kasetsart University : Algebra, Number theory, Financial mathematics, Fluid dynamics, classical analysis.

Khon Kaen University : Functional analysis, Universal algebra, Probability theory, Number theory, Numerical analysis, Graph and combinatorics, Fixed-point theory and Semigroups.

King Mongkut's Institute of Technology Ladkrabang : Partial differential equation, Nonlinear ordinary differential equation, Integral equation, Differential geometry, Calculus of variation, Mathematical modelling, Optimization, Supply chain logistics, Global optimization, Environmental model, Dynamical systems, Numerical analysis, Finite element method, Finite difference method, Flow analysis, Polymer processing, Data analysis, Applied mathematics for medical science, Nonlinear functional analysis, Special function, Spectrum theory, Graph theory, Topology, Real and Complex analysis, Set theory, Rough sets, Linear algebra, Transformation semigroups, Matrix theory, Operator theory, Vector analysis



Rather a long answer but I agree with this poster - There is too much stereotyping of both Thais (and Expats) on some forums

[Phronesis]

All this appreciation has nothing to do with the economy of Thailand as such. It is the result of fat cat Wall Street GordonGeckos moving billions of dollars around Asia, borrowing dollars in NY at 0.25% interest and then buying Thai (Philippine, Vietnamese etc etc) bonds at the healthy going rate of 3+%. Nice profit of 2.75% (at least) on a billion dollars, if you can get it.

Then the "experts" who creepy-crawly on to CNBC or some other arm of the Ministry of Propaganda solemnly declare how emerging markets are where your money should now be. So, all the sheeple move their money into the Thai stock market, where Gecko has only last week bought a billion dollarsworth of shares to push up the index even more, and now, hey presto, time to take the money out again.

Lots of ways to make money (if you already have it).

Yes there are some "swinging dicks" manipulating the SET with foreign capital.

But their wads are nothing compared to the vast oceans of Russian and middle eastern cash that are flowing in to this country for laundering.

Assets are being snapped up at ridiculous asking prices, with no due diligence, and with ABSOLUTELY no concern for ROI.

Why...investment isn't the motivation for the purchase...

There is no better example of this phenomenon than right here in Phuket...

Yes the currency carry trade out of low yield nations is huge.

But it is a drop in the ocean of dirty money flooding into Thailand as I type...

Edited April 23, 2013 by Phronesis

[blazes]

All this appreciation has nothing to do with the economy of Thailand as such. It is the result of fat cat Wall Street GordonGeckos moving billions of dollars around Asia, borrowing dollars in NY at 0.25% interest and then buying Thai (Philippine, Vietnamese etc etc) bonds at the healthy going rate of 3+%. Nice profit of 2.75% (at least) on a billion dollars, if you can get it.

Then the "experts" who creepy-crawly on to CNBC or some other arm of the Ministry of Propaganda solemnly declare how emerging markets are where your money should now be. So, all the sheeple move their money into the Thai stock market, where Gecko has only last week bought a billion dollarsworth of shares to push up the index even more, and now, hey presto, time to take the money out again.

Lots of ways to make money (if you already have it).

Yes there are some "swinging dicks" manipulating the SET with foreign capital.

But their wads are nothing compared to the vast oceans of Russian and middle eastern cash that are flowing in to this country for laundering.

Assets are being snapped up at ridiculous asking prices, with no due diligence, and with ABSOLUTELY no concern for ROI.

Why...investment isn't the motivation for the purchase...

There is no better example of this phenomenon than right here in Phuket...

Yes the currency carry trade out of low yield nations is huge.

But it is a drop in the ocean of dirty money flooding into Thailand as I type...

I have no reason to disbelieve you. And in fact do believe you.

But these broad statements do need some backing up, I think.

I notice all the millions of condos going up in Chiang Mai, with surely no "normal" market to soak up the supply of so many units. That would be some kind of evidence of possible money laundering, but it may also be a sign of that Asiatic (especially Chinese) preference for buying real estate as "investment" - even if you never, ever, enter the place and live there........

[Locationthailand]

Why buy US dollar ?

wouldn't Australian dollar be a better bet ? or Norwegian krone ?

or even gold for that matter ?

Precisely but right now Thailand bought tonnes of gold - literally, and PTP has pushed the overdraft by it's stupidity in spending and now the cupboard is bare thus the constant borrowing and threat to borrow more. And why would BOT buy USD when it will continue to fall? Agree if to purchase more stable currencies - but only if Thailand has a cash surplus. Otherwise they will be gambling - something the puppet master likes to do with OP's money.

[poanoi]

Guess they will simply use the dollars for buying oil,

easy money for both Thailand & USA btw, just more print money when you want something

Edited April 23, 2013 by poanoi

[asiamaster]

"0.18 per cent rise from Friday's closing to 25.58 per US dollar, the baht later lost 0.2 per cent to 28.74 at 3.12pm"

I know the Thais are not good in math but this does not make sense to me.....

Most likely a typo. Probably Baht 28.58 to 28.74 ... still not quite right, but closer.

"the Thais are not good in math "

"the Thais" includes 69 million people including those doing research in this small sampling of universities. I supposed based on this I could make an equally invalid generalization as say "the Thais" must be great at maths.

>The list of universities with significant research activities in mathematics

Rather a long answer but I agree with this poster - There is too much stereotyping of both Thais (and Expats) on some forums

Point taken- I'll stick to monotyping from now on

[dighambara]

All this appreciation has nothing to do with the economy of Thailand as such. It is the result of fat cat Wall Street GordonGeckos moving billions of dollars around Asia, borrowing dollars in NY at 0.25% interest and then buying Thai (Philippine, Vietnamese etc etc) bonds at the healthy going rate of 3+%. Nice profit of 2.75% (at least) on a billion dollars, if you can get it.

Then the "experts" who creepy-crawly on to CNBC or some other arm of the Ministry of Propaganda solemnly declare how emerging markets are where your money should now be. So, all the sheeple move their money into the Thai stock market, where Gecko has only last week bought a billion dollarsworth of shares to push up the index even more, and now, hey presto, time to take the money out again.

Lots of ways to make money (if you already have it).

FatCats following George Soros lead from 1997 - be prepared for another big crash in the Baht

[DRONGOH]

"0.18 per cent rise from Friday's closing to 25.58 per US dollar, the baht later lost 0.2 per cent to 28.74 at 3.12pm"

I know the Thais are not good in math but this does not make sense to me.....

Misprint (what's new?)

The news is: typo.

[mccw]

The ex govenor appears to be ........ an idiot !

[Naam]

All this appreciation has nothing to do with the economy of Thailand as such. It is the result of fat cat Wall Street GordonGeckos moving billions of dollars around Asia, borrowing dollars in NY at 0.25% interest and then buying Thai (Philippine, Vietnamese etc etc) bonds at the healthy going rate of 3+%. Nice profit of 2.75% (at least) on a billion dollars, if you can get it.

Then the "experts" who creepy-crawly on to CNBC or some other arm of the Ministry of Propaganda solemnly declare how emerging markets are where your money should now be. So, all the sheeple move their money into the Thai stock market, where Gecko has only last week bought a billion dollarsworth of shares to push up the index even more, and now, hey presto, time to take the money out again.

Lots of ways to make money (if you already have it).

FatCats following George Soros lead from 1997 - be prepared for another big crash in the Baht

Baht "crash" forecasted a zillion times in Thaivisa and that since 6½ years. yawwnnnn...

[Naam]

Why buy US dollar ?

wouldn't Australian dollar be a better bet ? or Norwegian krone ?

or even gold for that matter ?

Precisely but right now Thailand bought tonnes of gold - literally, and PTP has pushed the overdraft by it's stupidity in spending and now the cupboard is bare thus the constant borrowing and threat to borrow more. And why would BOT buy USD when it will continue to fall? Agree if to purchase more stable currencies - but only if Thailand has a cash surplus. Otherwise they will be gambling - something the puppet master likes to do with OP's money.

why would the Chinese Central Bank continously buy billions of Dollars "when it will continue to fall?" and which "cupboard is bare"? do you mean the BoT cupboard with the accumulated hoard of $177 billion? out which $100 billion were added during the last 4½ years. did the Tooth Fairy place these billions under the BoT's pillow?

[poanoi]

@Naam: look up US pressure on UK during Suez crisis,

where US threatened to sell off their sterling stockpile which would cause sterling to plummet