B O T Warns Thais To Prepare For Future Fluctuation Of Baht

[AnotherOneAmerican]

Not entirely, oil is paid for in USD so there's an impact there.

As I pointed out, in the last 5 years oil has become 10% cheaper for Thailand, but the fuel price has remained the same.

So no impact, when I should have been expecting a 10% reduction.

[weegee]

He thinks the baht is about to go into freefall, and wants to be on record as the guy that warned everyone.

Don't mention the loan the country can't get (too risky), the enormous amounts of money they lost in the rice scheme, or the elephant in the room.

I would think the chances of getting the finance for all their pet projects are getting slimmer and slimmer. They can't even tell the truth to Moody's. Why on earth would any private lenders get involved after that?

This is like watching a kid squirm all the way through school holidays knowing that his school report is at the bottom of his bag, whilst the parents wait for it to be delivered by post. It's coming one way or another.

Let,s get something straight here! The BOt governor is NOT politically elected, and have on many occasions opposed the governments populist policies!

Spoken by a Thai.....but well put

[Thai at Heart]

Not entirely, oil is paid for in USD so there's an impact there.

As I pointed out, in the last 5 years oil has become 10% cheaper for Thailand, but the fuel price has remained the same.

So no impact, when I should have been expecting a 10% reduction.

Well you can be sure, with a devaluation they will pass it on to the consumers. Pump prices will increase, industrial consumer price will increase.

Non ethanol prices have been reduced by using ethanol to dilute.

Edited June 5, 2013 by Thai at Heart

[chiang mai]

Not entirely, oil is paid for in USD so there's an impact there.

As I pointed out, in the last 5 years oil has become 10% cheaper for Thailand, but the fuel price has remained the same.

So no impact, when I should have been expecting a 10% reduction.

Most rural folks have seen a 25% reduction by virtue of the deisel subsidy.

[weegee]

Like like like like hope it goes in freefall bigtime

And gasoline and all imported goods will go up in price BIG TIME. Tranportation go up BIG TIME! So even made in Thailand Goods go up BIG TIME, because high price gasoline! So everything come more exmensive again and peaple need more salary, etc. Who would invest in Thailand, when they transfer money back to Europe and get nothing in exchange? Not a very wise comment!

Funny I didn't see the price of any of this going down as the baht gained strength. Not saying your wrong. But, I would be more confident had I seen the prices go down.

I live in Thailand and I don't understand it either. I'm not in finance or anything obviously but I wonder what the average Thai makes of it. With oil futures traded in dollars and the baht strong against the dollar (or the dollar weak against the baht) - why isn't gasoline cheaper? Why are the prices of goods higher?

Welcome to Thailand....

[ericjt]

Very few people, including me, know why currencies go up and down against each other. Maybe some central bankers do -- because they have a hand in setting exchange rates -- and maybe not.

IMHO this is the Thai govt giving notice that it's going to do whatever it takes to push down the value of the Thai Baht. So people planning for the near future should probably expect to see some weakness in the THB vs the USD.

Why? Because that's what the Thai govt has decided is in the country's best interest for now. It's been a long time since fundamentals like interest rates moved currencies.

[Thai at Heart]

I read a paper on the j curve for Thailand that estimated it will take 5 quarters for Thai exports to adjust to a significant adjustment in the exchange rate. Longer than any other country in the region because of its heavy reliance on imported inputs.

So, ..... Let's wait and see.

Edited June 5, 2013 by Thai at Heart

[sgtsabai]

I may be wrong, but I believe for the average Thai a devaluation of the Baht won't make any difference. For me, oh yea!

I'm at a loss to figure out how so many Thais have been able to afford new houses, new vehicles, etc. over the past few years. I'm at a loss as to how many of the village 'workers' are surviving, aside from the fact they grow much of their own food. I do know that theft has become a problem where it wasn't before. Where is that money coming from? Credit????? Inflation may become a problem, you mean it isn't already? Prices on many things have doubled over the past 10 years, and keep going up. I have to listen to it every time my wife goes to the market. Inflation is real and has been here for some time. Like one poster noted, eggs, ok how about pork, shrimp (I could buy in the states almost as cheap), chicken? Check out the price for a room in that hotel you used to stay in 10 years ago, how about that beer, or barfine, or ST/LT. Yes those are tourist prices, but Thai prices have gone up at the same time. Could devaluation result in inflation, maybe, but give me 42 baht to the USD any day. Nope, not holding my breath.

[hellodolly]

He thinks the baht is about to go into freefall, and wants to be on record as the guy that warned everyone.

Don't mention the loan the country can't get (too risky), the enormous amounts of money they lost in the rice scheme, or the elephant in the room.

He is taken his orders from Soros Soros told his close friends watch 60 baht to the dollar

People get old and lose the ability to use common sense.

Just what does he think is going to make the American Dollar that strong?

Mindless babbling. good thing he has responsible staff to filter out his nonsense.

[hellodolly]

Surely even 5 year olds know the baht will plummet and the reasons for it and the real reasons it was pushed so high.

Could you please explain in simple terms for my benefit,"the real reasons it was pushed so high."

Not being sarcastic here but I (and possibly a few others) don't know either the real or supposed reasons for the baht strength, just assumed it was because the UK and USA economies are in the shitter.

It was probably pushed high to fool the Thai people into thinking that Thailand's economy is sooooo good, and probably 90% of them believe it.

Not my field but when you have less than a 1% unemployed does that not mean your econo0my is doing good?

I am not talking about the standards of living here that is another topic.

[davejones]

I think he's just spelling things out for Kittirat and his cohorts rather than the Thai people who, bless them, are blissfully unaware of coins beyond the Baht

Most Thais I know are very aware of USD and EURO exchange rate. Many Thais export goods, so it's obvious that they know about other currencies. Maybe it's all about the type of people you hang out with.

[rametindallas]

Surely even 5 year olds know the baht will plummet and the reasons for it and the real reasons it was pushed so high.

Could you please explain in simple terms for my benefit,"the real reasons it was pushed so high."

Not being sarcastic here but I (and possibly a few others) don't know either the real or supposed reasons for the baht strength, just assumed it was because the UK and USA economies are in the xxxxxxx.

I'll take a stab. Step 1) Wealthy movers and shakers drive up the value of the Baht and buy foreign currency relatively cheaply. Step 2) When the bottom falls out and the Baht loses value, they use the foreign currency to buy back Baht. Step 3) Profit

[NeverSure]

Very few people, including me, know why currencies go up and down against each other. Maybe some central bankers do -- because they have a hand in setting exchange rates -- and maybe not.

IMHO this is the Thai govt giving notice that it's going to do whatever it takes to push down the value of the Thai Baht. So people planning for the near future should probably expect to see some weakness in the THB vs the USD.

Why? Because that's what the Thai govt has decided is in the country's best interest for now. It's been a long time since fundamentals like interest rates moved currencies.

I don't believe that's it at all. High interest rates certainly do move currencies. Right now the US and the UK are paying almost no interest, but Thailand is paying a relatively high rate due to a bad credit rating. The US and the UK can pay almost nothing because they are seen as safe havens. People who are risk adverse put their money there.

People who will take some more risk for a higher return will move money into Thailand for the higher interest rate. Every time someone does that, he has to exchange his currency and buy baht to deposit. This creates demand for baht and drives the price of the baht up.

Thailand is a tiny economy and can't do what the UK and the US do in managing currency rates. Don't forget that the US and the UK are deliberately driving the value of their currencies down to help their exports, and keep their industries and therefore their economies rolling. Thailand can't do that because its credit rating sucks and it has to pay the higher yield to attract the money it needs to finance its deficits and debt.

Also, Thailand has had a boom in investment in real estate and the SET, and all foreign money invested in that first has to be converted to baht, further creating demand for baht and driving its exchange rate up.

But if the SET starts dropping, and/or real estate starts going sideways, and/or the reality of the money owed for the rice scheme actually comes to light, people will rush to get their money out of Thailand. In order to do that they have to exchange their baht for another currency, flooding the market with baht and driving its price down.

If that happens there will be an almost panic selling of the SET and real estate, and Thailand will lock the banks to stop outflows of currency. People won't be able to get their money because Thailand doesn't really have it. The banks are broke and bluffing, and government is broke and bluffing, and if when this thing unwinds it won't be pretty.

[NeverSure]

He thinks the baht is about to go into freefall, and wants to be on record as the guy that warned everyone.

Don't mention the loan the country can't get (too risky), the enormous amounts of money they lost in the rice scheme, or the elephant in the room.

He is taken his orders from Soros Soros told his close friends watch 60 baht to the dollar

People get old and lose the ability to use common sense.

Just what does he think is going to make the American Dollar that strong?

Mindless babbling. good thing he has responsible staff to filter out his nonsense.

The American dollar is strong because it is the biggest economy in the world by far, and it has the most natural resources which equal wealth. Maybe you haven't noticed, but for the first time in years, this quarter the US government is running a surplus and actually paying down some debt.

Maybe you missed the memo, but the US has more oil reserves than all of the rest of the world combined. Its oil output is increasing 20% this year, and by 2017 it will surpass Saudi Arabia as the world's largest oil producer. Within ten years it will be energy independent and a net exporter of oil. The US is huge and don't forget Alaska, and has huge wealth in the form of natural resources. It is also profiting highly from tech, which it basically developed and owns including this internet and the infrastructure to run it.

The US economy has bottomed and is beginning a slow recovery. It is fueled by manufacturing and technology and natural resources which equal wealth. It would be premature to plan the funeral of the US dollar.

[bobl]

Like like like like hope it goes in freefall bigtime

Okay, genius, tell us all how that would be a good thing.

If the baht dropped from 30 to 60 tomorrow and you were sitting on a bunch of dollars then yeah, you might be able to take advantage and get a few bargains - but your glee will be very short lived when the market adjusts to compensate - until your dollar that used to buy you 30 baht now buys you 60 baht, but your goods that used to cost you 30 now cost 70.

[AnotherOneAmerican]

Like like like like hope it goes in freefall bigtime

Okay, genius, tell us all how that would be a good thing.

If the baht dropped from 30 to 60 tomorrow and you were sitting on a bunch of dollars then yeah, you might be able to take advantage and get a few bargains - but your glee will be very short lived when the market adjusts to compensate - until your dollar that used to buy you 30 baht now buys you 60 baht, but your goods that used to cost you 30 now cost 70.

That has never happened before, why should it happen now?

You forget most multinationals price items by what the locals can afford (or are prepared to pay), not production cost + % profit.

[Thai at Heart]

Surely even 5 year olds know the baht will plummet and the reasons for it and the real reasons it was pushed so high.

Could you please explain in simple terms for my benefit,"the real reasons it was pushed so high."

Not being sarcastic here but I (and possibly a few others) don't know either the real or supposed reasons for the baht strength, just assumed it was because the UK and USA economies are in the xxxxxxx.

I'll take a stab. Step 1) Wealthy movers and shakers drive up the value of the Baht and buy foreign currency relatively cheaply. Step 2) When the bottom falls out and the Baht loses value, they use the foreign currency to buy back Baht. Step 3) Profit

And does anyone think "they" all in unison have the ability to push USD around the world to cause this effect?

Or maybe the bot, which is staunchly independent and willing to pick a fight with Thaksin policies, kept interest rates high to fight inflation whilst the USA was printing money hand over fist?

[ray23]

Like like like like hope it goes in freefall bigtime

Okay, genius, tell us all how that would be a good thing.

If the baht dropped from 30 to 60 tomorrow and you were sitting on a bunch of dollars then yeah, you might be able to take advantage and get a few bargains - but your glee will be very short lived when the market adjusts to compensate - until your dollar that used to buy you 30 baht now buys you 60 baht, but your goods that used to cost you 30 now cost 70.

That has never happened before, why should it happen now?

You forget most multinationals price items by what the locals can afford (or are prepared to pay), not production cost + % profit.

Well in the 97 crash the baht went from 26 to one to 56 to one in two days. Banks did fail. But, not the big ones. Did thing double in price I don't know I wasn't here I don't think Thailand is going to fail. It ha been due for a huge correction. The Government and the BOT were both trying to figure out how to weaken the baht.

It went up about 7% since the first of the year, at the moment they are just giving that back. If it gets past 33 I would be real surprised. It will certainly take something major for that to happen. So this could end up being much a do about nothing.

[ericjt]

Very few people, including me, know why currencies go up and down against each other. Maybe some central bankers do -- because they have a hand in setting exchange rates -- and maybe not.

IMHO this is the Thai govt giving notice that it's going to do whatever it takes to push down the value of the Thai Baht. So people planning for the near future should probably expect to see some weakness in the THB vs the USD.

Why? Because that's what the Thai govt has decided is in the country's best interest for now. It's been a long time since fundamentals like interest rates moved currencies.

I don't believe that's it at all. High interest rates certainly do move currencies. Right now the US and the UK are paying almost no interest, but Thailand is paying a relatively high rate due to a bad credit rating. The US and the UK can pay almost nothing because they are seen as safe havens. People who are risk adverse put their money there.

People who will take some more risk for a higher return will move money into Thailand for the higher interest rate. Every time someone does that, he has to exchange his currency and buy baht to deposit. This creates demand for baht and drives the price of the baht up.

Thailand is a tiny economy and can't do what the UK and the US do in managing currency rates. Don't forget that the US and the UK are deliberately driving the value of their currencies down to help their exports, and keep their industries and therefore their economies rolling. Thailand can't do that because its credit rating sucks and it has to pay the higher yield to attract the money it needs to finance its deficits and debt.

Also, Thailand has had a boom in investment in real estate and the SET, and all foreign money invested in that first has to be converted to baht, further creating demand for baht and driving its exchange rate up.

But if the SET starts dropping, and/or real estate starts going sideways, and/or the reality of the money owed for the rice scheme actually comes to light, people will rush to get their money out of Thailand. In order to do that they have to exchange their baht for another currency, flooding the market with baht and driving its price down.

If that happens there will be an almost panic selling of the SET and real estate, and Thailand will lock the banks to stop outflows of currency. People won't be able to get their money because Thailand doesn't really have it. The banks are broke and bluffing, and government is broke and bluffing, and if when this thing unwinds it won't be pretty.

I agree with what you say about maybe "hot" money coming into relatively lightly regulated Thailand, the SET, real estate, etc, and pushing up the Baht. Then maybe hedge funds coming in, too, and looking to profit from the rise of the Baht. Could be, I guess. Of course, getting large amounts of money *out* of Thailand is not always easy, right? Is it easier for the big guys than for us little guys?

But high interest rates attracting money to Thailand and pushing up the Baht? I don't think so. Not for the last 5 years, anyhow.

If somebody was looking for high interest rates during the last 5 years, Australia and New Zealand have been the place to go. As little as a year ago, retail savers could still get 4-5% on Aussie Dollar or New Zealand Dollar savings accounts. More on investment grade bonds. So why buy the Thai Baht when you could get higher interest rates from stronger (and more freely traded) currencies/countries?

So why, IMHO, has the Baht been so strong? "Hot" money? Maybe. Interest rates? Doesn't compute. And there's no reason I can see why a (small) .25% change in any rate should start driving the Baht down. It will take a lot more than that to move the Baht any appreciable amount.

[ray23]

I watched the baht for about five years now, the SET was on fire. It would go down and the baht would move in value, when people made safe haven moves such as the dollar and Gold. When the scare went away, it would come back. Folks we are taking hedge funds here, they have tons of money and it does have effect.

Look at the recent growth in the Vietnam market, why a huge investor left Thailand and move there. So I would not be surprised to see growth in the dong at all.

Hot can make a market or break it just as fast. You know markets and currency go up down all the time. Thailand actually believed it was the center of all. Well it hit bubble territory, smart money took the profits and moved on. If it gets back to reality it just may come back.

So far I see no need for panic just business as usual. Maybe the biggest threat Thailand faces today would be the cost of the trillion dollar loan they are trying to seek. If the Democrats don;t stop it.

As to the average Thai I haven't seen their lifestyle change one bit, with the rice Scheme and the minimum wage increase,

[chiang mai]

One thing that NS and I do agree on is the cause of the Baht's strengthening and that being that it was caused mainly by this so called hot money, mostly western funds looking for yield and finding a home in the Thai bond market, the SET, the Thai property market and so on. But now the signs are that the US is starting to recover and hedge funds at least have mostly withdrawn their funds from Thailand, since hedge funds tend to be early adopters it can be expected that others will follow, how low will it go, who knows but at least we understand the cause.

EDIT to include the following:

"The stock of foreign capital flows into emerging markets has soared from $4 trillion to $8 trillion since 2008, a big enough sum to cause global
ructions if the mood turns. That has clearly begun in such countries as South Africa and Turkey, where there is a toxic mix of political risk and
current account deficits above 6pc of GDP".

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10102008/Emerging-markets-displace-Europe-as-fulcrum-of-world-risk.html

Edited June 6, 2013 by chiang mai

[tango]

#36 '...specially in Vietnam. Nice hotel rooms for 400 Baht, with excellent service and great breakfast included, where you can get this today in Thailand?'

More to the point...where you can get this today in Vietnam?

Despite the Baht's strength good value at equal prices or less still abound in Thailand.

[oyster]

He thinks the baht is about to go into freefall, and wants to be on record as the guy that warned everyone.

Don't mention the loan the country can't get (too risky), the enormous amounts of money they lost in the rice scheme, or the elephant in the room.

I would think the chances of getting the finance for all their pet projects are getting slimmer and slimmer. They can't even tell the truth to Moody's. Why on earth would any private lenders get involved after that?

This is like watching a kid squirm all the way through school holidays knowing that his school report is at the bottom of his bag, whilst the parents wait for it to be delivered by post. It's coming one way or another.

I can relate to that - I was that kid ;-)

[hawthorne]

Surely even 5 year olds know the baht will plummet and the reasons for it and the real reasons it was pushed so high.

Could you please explain in simple terms for my benefit,"the real reasons it was pushed so high."

Not being sarcastic here but I (and possibly a few others) don't know either the real or supposed reasons for the baht strength, just assumed it was because the UK and USA economies are in the xxxxxxx.

I guess I am an unsuffisticated 40 something...I was under the impression the baht was stronger because the money supply was tight and the economy was stronger. From the article I gathered the money supply has become a little looser by the lowering of the interest rate sending more money into the economy. The old addage for every 100baht released for loan increases the money supply by almost 1000 baht. So as the govt makes it cheaper to borrow more people and companies will borrow as long as they see ways to profit from their barrowing. I guess you could also argue these are grounds for inflation as well, more money chasing the same amount of goods.

So for me, one who sends a fair bit of my fortune to Thailand each month (probably a large tip for most folks on TV), is this a warning that more loosening is coming in hopes of kick starting the financial markets? I have noticed my share prices decline almost 15% in the recent week or so which is the wrong way. Would like to see my Thai stock go back up if it would be so kind.

[ray23]

Ok in simple terms this is what happened

We will call the guy A. A in in America and has access to cheap money, since the rate was .25

So would A put the money back in America, only if wanted to lose it

So A takes the money out of America and puts in Thailand why? Because will get a higher interest rate for his money in Thailand. Say A brings it here. Now A can make a little money if he did do mare then put it in a Thai bank at a higher interest rate. Mind you he is risking .25% on the money he borrowed and the return is higher and so far he has not used his own money.

But, A wants to make more money, so he puts the money in short term bonds and wanted even more. So he puts it the SET 50 Stocks the big boys so A is pretty safe. Hence huge inflows of mon3y into Thailand. Driving the baht value ever higher. Again increased A's profit. Keep in mind A's risk is .25% through this process.

Then here comes the FED who says they may taper down the amount of money they are giving away, supposedly to support America,

So A thinks to himself maybe the cheap money will stop. So he says time to take my profits. So A takes his money from Thailand takes somewhere else. The hot money in slows down, the Set Drops the baht drops.

So lets say A was one of those that could borrow billions of dollars. Imagine what 4% profit represents. His risk .25% of what he borrowed. I say .25 % it was probably a bit more then that.

These huge funds moving in and out of Thailand effects the value of the baht.

It was really as simple as that.

[AnotherOneAmerican]

Ok in simple terms this is what happened

We will call the guy A. A in in America and has access to cheap money, since the rate was .25

So would A put the money back in America, only if wanted to lose it

So A takes the money out of America and puts in Thailand why? Because will get a higher interest rate for his money in Thailand. Say A brings it here. Now A can make a little money if he did do mare then put it in a Thai bank at a higher interest rate. Mind you he is risking .25% on the money he borrowed and the return is higher and so far he has not used his own money.

But, A wants to make more money, so he puts the money in short term bonds and wanted even more. So he puts it the SET 50 Stocks the big boys so A is pretty safe. Hence huge inflows of mon3y into Thailand. Driving the baht value ever higher. Again increased A's profit. Keep in mind A's risk is .25% through this process.

Then here comes the FED who says they may taper down the amount of money they are giving away, supposedly to support America,

So A thinks to himself maybe the cheap money will stop. So he says time to take my profits. So A takes his money from Thailand takes somewhere else. The hot money in slows down, the Set Drops the baht drops.

So lets say A was one of those that could borrow billions of dollars. Imagine what 4% profit represents. His risk .25% of what he borrowed. I say .25 % it was probably a bit more then that.

These huge funds moving in and out of Thailand effects the value of the baht.

It was really as simple as that.

Only nobody in their right mind would bring clean money into a banana republic like Thailand.

Australia has always offered higher interest, but looks at the source of the money a bit closer.

[ray23]

Well the guy asked for a simple explanation and that is what he got. Matters not what you think as to the right mindedness, that is what happened. The Set went from the 600 range to the 1600 Range in a two year time frame.

You don't appear to have been watching what was going on here. Bannana Republic or not, in that two years fortunes were made.

[AnotherOneAmerican]

Well the guy asked for a simple explanation and that is what he got. Matters not what you think as to the right mindedness, that is what happened. The Set went from the 600 range to the 1600 Range in a two year time frame.

You don't appear to have been watching what was going on here. Bannana Republic or not, in that two years fortunes were made.

I don't need to make a fortune.

I only need to ensure I don't lose one.

[ray23]

That is excellent. but, what does that have to do with the baht?

That was the question. Not about where it is best to invest. I'm sure you do just fine and I hope stays that way. But that is really another topic.

[NCC1701A]

Just crossed 31...