Questions for all the currency experts on here...

1) What factors led to the strong THB (28/$1) last year

2) What factors are most influential in the THB getting stronger? Weaker?

3) Those with chart/data access, what is the average THB rate for the last 5 years? I am guessing 29 or 30.

Thx.

USD THB 5-Year, high 28.53 / low 36.26

Thanks... but I don't see in a chart what causes the changes, typically, for THB ;-)

I'm not 100% certain on this, but I heard that a lot of people jumped in to invest in the Thai stock market last year.

In order to buy Thai stocks, you need to buy THB first, so that increased the demand for THB, thus raising the price (i.e. less THB per USD).

Also I think that Thai government bonds have an attractive yield vs. US Treasury bonds (which were at record low yields last year), so a lot of capital flowed in to buy bonds.

In mid-2013, there was a large exit from Thai stocks, so there was much selling of THB to get USD.

US Treasury yields also started rising, so I assume this made Thai government bonds less attractive.

A trade surplus/deficit also affects exchange rates but I'm not as knowledgeable about that. I'm not sure if the rice-pledging scheme affected the currency rates at all.

Anyway the Forex market is complex and no one has the full answer, but I'd love to hear more from someone more knowledgeable.

Edited January 26, 201412 yr by fishbrando

In answer to your questions...

1) supply and demand

2) supply and demand

Sorry but go and read the other posts ,there are loads and the posters have all written their reasons a hundred times in the last few weeks.

Basically agreeing with what other posters above said but the most decisive factor not clearly spelled out is QE2 and QE3 the flooding of the global market with printing of USD. A significant portion of these dollars were converted to Baht creating demand for baht which inflated the Thai bond and stock markets. When the money runs away from political instability and other emotional factors this creates a demand for selling baht and buying dollars.

Welcome to the big casino of global finance where the "house always wins".

I agree that QE is sort of uncharted territory and mid 2013 was the turning point. The expectations is that there will be a fallout in emerging markets.

Also interesting that they just brought on Stan Fischer as US fed vice chair who was one of the key players in the 97 Asian financial crisis.

Thanks... but I don't see in a chart what causes the changes, typically, for THB ;-)

sometimes there are more sellers than buyers = the baht goes down; at other times there are more buyers than sellers = the baht goes up.

Good point about QE. QE caused US Treasuries to become really expensive, i.e. caused the yield to go down. This caused a lot of investors to hunt for greater yield so they went to buy bonds in other countries and caused government bond yield to go down around the world. Recently some third world country in Africa was issuing bonds at 5%! (I can't recall off the top of my head which country this was.)

Now that the Fed is tapering QE, US Treasury yields should rise. China also looks reluctant to purchase more US Treasuries, so that should cause even more of a rise in yield.