Thai Govt Eases Calls For Action On Baht

[TheGhostWithin]

Whilst Thailand is happy to see the baht grow stronger and stronger Australia is working overtime to try and bring the strong aisssie dollar down. Tourism, local manufacturing and exports are suffering. The car industry is in danger of going under and job loses are on the rise. It is putting a strain on the government purses. The strong dollar is good for aussies travelling abroad and expats but back home it is not so rosie.

what makes you think "Thailand is happy to see the Baht grow stronger and stronger?" did you conduct a poll or interviewed "Thailand"?

For every winner there is a loser, I haven't heard the weak currency rich country argument in the long term.

Countries with strong currencies are only stronger if they export advanced niche market products, such as Switzerland and previously the in UK.

Countries which thrive on low value currencies are "mass production" industrial countries such as Japan (less so over time, but still with regards to autos), China, Thailand and Malaysia. All of these countries bar one, who artificially controls heir currencies is suffering under a high exchange rate. The one which controls (China), is still suffering.

Certain powers seem to like a high baht, because it gives them more external purchasing power. The consequences of local exporters are relatively insignificant for these people, they do not care about the small man who will suffer when markets slow locally because of the high baht. I suspect other members of the leadership like a high baht because "it sounds nice" and must be a cool thing to brag about, not understanding the underlying fundamentals of a strong currency in an export driven economy such as Thailand.

Thai's love to eat, but they cant eat all that rice and canned fruit alone.

Thais love to party on Khao San Road, but they cant drink all that beer alone.

Lonely Thai mothers love their relaxing lives in the village with the daughter working in a "hotel" in Bangkok, but their lives will not be sustained when daughter sleeps alone.

Apple loves to dance every night, but she can't if John skips his trip this year because Thailand is too expensive. She can't afford the som tam anymore, it went up from 15 baht to 30 baht overnight. Barry goes to Cambodia in his time off the rig now, and the US Navy does not come to Phuket anymore because another destination offered them a better (and safer) deal on their R&R stops.

Its all a vicious cycle that has already started.

Apologies for the generalisations, but these generalisations fund a huge amount of the Thai economy.

Edited April 28, 2013 by TheGhostWithin

[TheGhostWithin]

Don't suppose it has occured to them that sooner or later the investors will want to sell these bonds and get there money back plus interest!

They are probably banking that by then, ASEAN will have kicked in and other members will lend with preferential lending rates, and under less stringent conditions. They could well be right. But how many friends does Thailand REALLY have in ASEAN? They have picked fights with half of them at least in the past 20 years or so.

[Thai at Heart]

Whilst Thailand is happy to see the baht grow stronger and stronger Australia is working overtime to try and bring the strong aisssie dollar down. Tourism, local manufacturing and exports are suffering. The car industry is in danger of going under and job loses are on the rise. It is putting a strain on the government purses. The strong dollar is good for aussies travelling abroad and expats but back home it is not so rosie.

what makes you think "Thailand is happy to see the Baht grow stronger and stronger?" did you conduct a poll or interviewed "Thailand"?

For every winner there is a loser, I haven't heard the weak currency rich country argument in the long term.

Countries with strong currencies are only stronger if they export advanced niche market products, such as Switzerland and previously the in UK.

Countries which thrive on low value currencies are "mass production" industrial countries such as Japan (less so over time, but still with regards to autos), China, Thailand and Malaysia. All of these countries bar one, who artificially controls heir currencies is suffering under a high exchange rate. The one which controls (China), is still suffering.

Certain powers seem to like a high baht, because it gives them more external purchasing power. The consequences of local exporters are relatively insignificant for these people, they do not care about the small man who will suffer when markets slow locally because of the high baht. I suspect other members of the leadership like a high baht because "it sounds nice" and must be a cool thing to brag about, not understanding the underlying fundamentals of a strong currency in an export driven economy such as Thailand.

Thai's love to eat, but they cant eat all that rice and canned fruit alone.

Thais love to party on Khao San Road, but they cant drink all that beer alone.

Lonely Thai mothers love their relaxing lives in the village with the daughter working in a "hotel" in Bangkok, but their lives will not be sustained when daughter sleeps alone.

Apple loves to dance every night, but she can't if John skips his trip this year because Thailand is too expensive. She can't afford the som tam anymore, it went up from 15 baht to 30 baht overnight. Barry goes to Cambodia in his time off the rig now, and the US Navy does not come to Phuket anymore because another destination offered them a better (and safer) deal on their R&R stops.

Its all a vicious cycle that has already started.

Apologies for the generalisations, but these generalisations fund a huge amount of the Thai economy.

It's not the Thais deliberately trying to create a strong baht, it's the USA, Europe and Japan desperately trying to inflate their way out of massive debt and get their economy moving by borrowing to finance spending.

There has never been a scale of borrowing like it. So what does anyone expect? The baht to weaken, lest we forget, the currency still isn't back to pre 1997 crisis levels. 45 to the USD was a legacy from Asia's crisis, it's value today is a reflection of the crisis in the developed world, along with relatively good growth in Thailand. If the currency gets to strong, demand will drop and the baht will devalue. The market will sort the value out for itself in the medium to long term.

And, value isn't tied to the niche you export, if the world wants widgets, relatively reliably and relatively cheaply and you make them, they demand your product. Simple.

Edited April 28, 2013 by Thai at Heart

[TheGhostWithin]

It's not the Thais deliberately trying to create a strong baht, it's the USA, Europe and Japan desperately trying to inflate their way out of massive debt and get their economy moving by borrowing to finance spending.

There has never been a scale of borrowing like it. So what does anyone expect? The baht to weaken, lest we forget, the currency still isn't back to pre 1997 crisis levels. 45 to the USD was a legacy from Asia's crisis, it's value today is a reflection of the crisis in the developed world, along with relatively good growth in Thailand. If the currency gets to strong, demand will drop and the baht will devalue. The market will sort the value out for itself in the medium to long term.

And, value isn't tied to the niche you export, if the world wants widgets, relatively reliably and relatively cheaply and you make them, they demand your product. Simple.

Yes, and when a commodity produced by a country is exported, it is paid for typically in local currency (in this case baht). It is DEMANDED by the seller, who sells his currency (lets say NZD, my local currency) to get the baht to pay for the product. This is usually an invisible exchange handled by the bank (in Thailand or New Zealand). The baht is bought, the NZ Dollar is sold. This increases the value of the baht, and reduces the value of the NZ Dollar - making the local product more expensive to a foreigner looking to buy with a foreign currency.

Countries which produce niche products (products others do not or can not) can survive on a high currency, because importers are forced to pay whatever price the exporter sets. They profit hugely from this. An example being fine watch production in Switzerland, or Aircraft production in the UK. Rice exports from Thailand can be and are being replicated in many other countries, as are Thailands other main exports and also tourism.

The NZ Dollar has gained against the USD, EUR, GBP, AUD, SAR, CHF, JPY, KRW and others in the past year but gained only 60 satang against the baht.

I should also mention, we have had the strongest export season here for many years with some of the best GDP increases in the western world (I know, its' not much to brag about). So what has happened to make the Thai Baht so strong this year? The answer is not exports, not tourism, it is market manipulation.

Edited April 28, 2013 by TheGhostWithin

[Thai at Heart]

It's not the Thais deliberately trying to create a strong baht, it's the USA, Europe and Japan desperately trying to inflate their way out of massive debt and get their economy moving by borrowing to finance spending.

There has never been a scale of borrowing like it. So what does anyone expect? The baht to weaken, lest we forget, the currency still isn't back to pre 1997 crisis levels. 45 to the USD was a legacy from Asia's crisis, it's value today is a reflection of the crisis in the developed world, along with relatively good growth in Thailand. If the currency gets to strong, demand will drop and the baht will devalue. The market will sort the value out for itself in the medium to long term.

And, value isn't tied to the niche you export, if the world wants widgets, relatively reliably and relatively cheaply and you make them, they demand your product. Simple.

Yes, and when a commodity produced by a country is exported, it is paid for typically in local currency (in this case baht). It is DEMANDED by the seller, who sells his currency (lets say NZD, my local currency) to get the baht to pay for the product. This is usually an invisible exchange handled by the bank (in Thailand or New Zealand). The baht is bought, the NZ Dollar is sold. This increases the value of the baht, and reduces the value of the NZ Dollar - making the local product more expensive to a foreigner looking to buy with a foreign currency.

Countries which produce niche products (products others do not or can not) can survive on a high currency, because importers are forced to pay whatever price the exporter sets. They profit hugely from this. An example being fine watch production in Switzerland, or Aircraft production in the UK. Rice exports from Thailand can be and are being replicated in many other countries, as are Thailands other main exports and also tourism.

The NZ Dollar has gained against the USD, EUR, GBP, AUD, SAR, CHF, JPY, KRW and others in the past year but gained only 60 satang against the baht.

I should also mention, we have had the strongest export season here for many years with some of the best GDP increases in the western world (I know, its' not much to brag about). So what has happened to make the Thai Baht so strong this year? The answer is not exports, not tourism, it is market manipulation.

It is a gargantuan flood of money from the rest of the world parking itself in Thailand for the interest rates. But they darent cut rates to much because of inflation.

Most exports from Thailand are priced is USD.

It's not manipulation, it is the market reflecting Thailand's ability to pay relatively better interest rates, in a world of negative real interest rates. You can call it speculation, in essence it is just risk based business.

Just wait until the flood of yen hits Asia. God knows how high the thai stock market will go?

The value is just the sum of total demand versus total supply over a period of time. GDP grows, total domestic and foreign demand increases for a country's products and services grows, the value goes up.

Funnily, the Swiss have been furiously neutralising the strengthening of the Swiss franc as money flooded in there. Once the baht really gets too expensive, total demand for exports will drop, but Thailand exports are so much more than just rice. Just look at the car export numbers.

The cost of the product is so much more than just 300 minimum wage.

FDI still seems ok. I think the baht will bumble along between 28 and 30 to the usd for a while yet. There is no sign that any of the big economies are going to raise interest rates for a very long time.

The euro is going to come under more pressure, if it survives at all, and the Brits are apparently over the moon to have avoided a triple dip with 0.3% growth.

Where is the good news to suck the money out of Asia back to the west?

Edited April 28, 2013 by Thai at Heart

[TheGhostWithin]

It is a gargantuan flood of money from the rest of the world parking itself in Thailand for the interest rates. But they darent cut rates to much because of inflation.

Most exports from Thailand are priced is USD.

It's not manipulation, it is the market reflecting Thailand's ability to pay relatively better interest rates, in a world of negative real interest rates. You can call it speculation, in essence it is just risk based business.

Just wait until the flood of yen hits Asia. God knows how high the thai stock market will go?

The value is just the sum of total demand versus total supply over a period of time. GDP grows, total domestic and foreign demand increases for a country's products and services grows, the value goes up.

Funnily, the Swiss have been furiously neutralising the strengthening of the Swiss franc as money flooded in there. Once the baht really gets too expensive, total demand for exports will drop, but Thailand exports are so much more than just rice. Just look at the car export numbers.

The cost of the product is so much more than just 300 minimum wage.

FDI still seems ok. I think the baht will bumble along between 28 and 30 to the usd for a while yet. There is no sign that any of the big economies are going to raise interest rates for a very long time.

The euro is going to come under more pressure, if it survives at all, and the Brits are apparently over the moon to have avoided a triple dip with 0.3% growth.

Where is the good news to suck the money out of Asia back to the west?

That would sound logical, but interest rates here are at 4.25% p.a - rates I could find in Thailand are around 3% p.a on a term deposit.

Considering risk, New Zealand would be considered a much more stable and less risky market than Thailand. So why has Thailand held up against higher yielding less risky markets in a risk-averse market environment?

Edited April 28, 2013 by TheGhostWithin

[Robby nz]

Two reasons mate both contained in the OP

Reason /1

Areepong Bhoocha-oom, Finance permanent secretary, said that of the Bt50-billion bonds issued, about Bt40 billion were inflation-linked bonds, and that foreign investors had bought up 60 per cent of these.

The ministry said it would stop issuing new inflation-linked bonds as they could cause an influx of foreign capital and cause the baht to appreciate further.

Reason /2

To discourage capital inflow, which has been causing baht appreciation, several other measures have been introduced, including the collection of taxes or fees that require the Finance Ministry's approval, an anonymous source from the Bank of Thailand said.

The Finance Ministry has not been charging taxes and fees and 'several other measures' on the transactions.

Meaning the "investors" are getting a better deal (more profit) than elsewhere.

And why?

Areepong said the issuing of bonds was necessary for the government's budget deficit, though the Finance Ministry might adjust conditions on the purchase of government bonds or block a set number for domestic retail investors.

To try to hide the budget deficit that's why.