Why Does the Thai Baht Continue to be So Strong?

[chiang mai]

Except THB cannot be exported hence FOREX manipulation is only possible in country by BOT licensed banks.

are you saying the Thai baht is not traded on the Forex? "The Thai Baht in the Forex Market

According to the Bank for International Settlements or BIS, the Thai Baht ranked 26^th among the most actively traded currencies in the forex market in April 2010, accounting for 0.2 percent of average daily forex market trading volume that month.

The Thai Baht trades most actively against the U.S. Dollar as the counter currency in the USD/THB currency pair. In the foreign exchange market, this pair is typically known as Dollar Baht. The Thai Baht lacks a popular nickname in the forex market, so it is typically referred to simply as the Thai Baht by forex traders.

Furthermore, due to Thailand’s industrial and service led free-market economy, the Thai Baht has enjoyed considerable interest among traders in the forex market despite its status as an exotic currency. Nevertheless, since Thailand is a net importer of fuels, raw materials and capital goods, and a net exporter of textiles, shoes, and electronics, the value of the Thai Baht can be influenced by fluctuations in the relative values of those items." http://www.ozforex.com.au/news-commentary/forex-wiki/currency-encyclopedia/thb

"How Soros earns $790 Million, crashes the Thai Baht and triggers the Asian crisis.

The second most notorious trade of Soros came in 1997 as he saw a possibility that the Thai Baht could go down so he went short on the baht (by going long on USD/THB) using forward contracts. His actions are often considered to be a triggering factor which formed the big Asian financial crisis affecting not only Thailand but also South Korea, Indonesia, Malaysia, Philippines, Honk Kong and others." http://forexillustrated.com/trading-strategies-biggest-trades-soros/

It is very actively traded on the fx Mkts....I sit 10 m away from one of the largest brokers in it and the don't stop all day....don't let anyone think it's on the sidelines .

Traded it is, delivered it is not (outside Thailand).

[thejcb]

I don't see the $USD drop of 2 or 3 baht. I see a recent drop of more like less than 2/10 of a baht, but it's been trading up and down in a narrow range.

I don't know why the baht seems strong either.

So funny, just writing anything with no justification, no reasoning.

I can also do this.... I see the US dollar to baht being around 100-120 next month and then dropping to 10-12 in March.

I can also just write any nonsense too.

What are you smoking? I made no predictions and I gave no reasons.

I merely pointed out the the trading range of TBT/USD had been in a narrow range recently.

Are you in another galaxy?

scribbled the foreign exchange predictor as it flies to another planet !

[SheungWan]

Checkout interest rates in the west and the very real prospect of deflation there and a slowdown in the recovery there goes quite a way in explaining why the bht is where it is.

Spot on. Forex is a market just like any other. Offer somebody 2.5% interest in Thai bank or 0.1% interest in UK bank, where will they keep their money? Everyone changing their home currency into THB is helping to push up the price as in any other market.

Interest rates are only one factor, witness the number of Brits who converted GBP into AUD prior the AUD drop in order to get a better interest rate.

[sandyf]

A year ago the US$ was 32.4b, the Euro 44b, China 5.25b, British 53b, CAD$ 30b, AUD 29.2b.

Now US$ is 32.7b, the Euro is 38.5b, China is 5.25b, British 49.6b, CAD$ is 27b, AUD 26.5b

Only US$ and China are holding steady.

You obviously have no Yuan expenses to deal with.

In 2013 the Yuan went from about 4.6 in May to 5.45 in December, bit of a blow to our university fees.

[nifty11]

The baht is pegged to the USD so it will only really collapse when the $ does. Need another US bank to go broke. Plus Thailand has large foreign currency reserves from tourism and farangs sending money back to their wives and girlfriends. That's a basic reason there will be a longer more complex explanation that most of us who aren't financial wizards wouldn't understand.

[Robert24]

@nifty11: the baht is not pegged to the $ anymore. BoT gave that up (peg @ 25 to $)in July 1997 which was the start of the Asian crisis. Since then the baht is free floating.

re foreign reserves: you are right the BoT has large foreign reserves ( about $150bn) which would allow them to help stabilize large currency swings if the feel they had to do that. But this has nothing to do with tourism nor with farangs sending money to their wives and gf.

[Gonsalviz]

No matter what our resident Genius says or anything else but it does seem to track the dollar . please now show me graphs going back 100 years proving it doesnt.

Until 1997 the Baht was pegged to the USD. Maybe it just became habit after that.

[i claudius]

No-one has mentioned ASEAN, of which Thailand becomes a leading member from 1st January this year!

God help us if they are the leaders.

[Ragzilb]

The dollar is stronger, Russia is collapsing, and oil prices are plummeting.

What of the Oil Prices, and how could it end this year?

With oil prices at about half what they were six months ago, the most vulnerable players in the oil business, the frackers who brought about the new American Oil Revolution, are imploding. If you think that’s just their end of the boat sinking, no worries here, think again. They are, or were, the last best hope of continuing the oil bonanza, and they’re done. As soon as that fact is so obvious that even Faux News has to admit it (this may take a few months), it will dawn on us all that the very same thing is happening to the deep water drillers, the Arctic drillers and the tar sands wringers.

It would have happened at any oil price. The slump has merely brought it on sooner, and will force us to face — this year! — the reality that we will never again have quite enough cheap oil. That’s the meaning of the Crash of 2015. Now, about the schedule: Here’s what’s happened, what’s happening and what’s about to happen.

Old News (Since January 1)

WBH Energy files for bankruptcy protection. American Eagle Energy suspends all drilling operations. US Steel to close two plants making steel pipe for oil drillers, laying off 750. Dallas Federal Reserve Bank sees job losses of 250,000 in eight states.

New News (Last couple of days)

Resolute Energy, operating in Texas, Utah and Wyoming, has just borrowed $150 million from the “alternative” investment group Highbridge Capital at an effective interest rate (after fees, guarantees and other legerdemain) of as much as 25%. That is not a typo – twenty five per cent interest. It would be bad enough if Resolute had to borrow to keep on drilling, but this loan was taken for the sole purpose of avoiding default on previous debt (which, if negotiated more than six months ago in the prevailing market, probably cost around six per cent).

Sanchez Energy, after having announced a reduction in its capital spending plans in November, announced a second cut that brings its capital budget down to half what it was expected to be. This was one of several such announcements from around the world as the oil companies try to preserve cash by not spending as much on developing new wells.

Laricina Energy, operating in the Canadian tar sands with $1.3 billion in equity financing (from stock sales) and $150 million in four-year notes, is in default on the notes and needs another $350 million to do what it’s doing. Next step: probably liquidation.

News About to Happen

Any notion that this is all a temporary supply/demand correction in the oil business, and only the oil business, of a kind that we’ve seen many times before and that will right itself shortly, can most kindly be described as delusional. Here’s why.

These operators cannot simply shut down their wells and sit on their hands waiting for prices to go back up, because they are up to their eyeballs in debt, much of which has to be rolled over every few months, or they go out of existence. That is why they will pump oil until they are carried off in nets, because that’s the only way they can get any money. (That also explains why Saudi Arabia will not cut production to boost prices; that would cost the Saudis more than selling at low prices.)

The total amount of debt being carried by the fracking industry right now is double the amount of debt that was involved in subprime mortgages in 2008. The discovery that the 2008 debt was based on fictional assets and nonexistent ability to pay brought the economy of the world to its knees. If you believe that the current bubble will not do the same thing when the cost of credit triples (see Resolute Energy, above), the underlying assets vaporize (for example, the future value of a deposit of oil that cannot be recovered at a profit), taking with them into the ether the imaginary money that has been propping the whole industry up — if you believe the results will not be similar, I have some junk bonds to sell you.

Much of the money used to buy the junk bonds and provide the leveraged loans (meaning loans that no one in their right mind would ever grant given the security offered and the demonstrated ability to repay) has itself been borrowed. When the bottom floor of this house of cards collapses, it is not going to leave untouched the top floors. Imaginary money can buy stuff only when it is in motion. When the music stops, you discover that there aren’t any chairs to find safety in. None.

[NeverSure]

I think we could overreact here. Yes, there are going to be serious problems. but the oil industry and oil borrowing aren't nearly as big as the numbers associated with the housing industry in 2007.

Also here, the consumer is benefitting while in the housing crash the consumer got hammered. Much of the real problem in 2007 was consumer (homeowner) related - homeowners losing all equity or even winding up upside down and losing homes. Foreclosed homes weren't worth nearly what was owed on them.

Banks had at least 5x as much money at risk in housing as they do in oil. Much of the oil debt is privately held and much of the investment is equity investment. Oil stocks have fallen off the table already.

I'm not saying there won't be a problem, but unlike Russia, oil is a sideline for the US while oil is "everything" for Russia.

250,000 job losses are bad, but the US is huge. There were 8.8 million jobs lost in the recent recession.

It could get worse with a domino effect, but unless it does, what is happening is nothing like 2007 - 2008.

[boike]

Bank of Thailand (BOT) buys billions of USD to keep the exchange rate at their preferred level. USD is still the preferred trading currency

Sent from my S4 LTE

[chiang mai]

Bank of Thailand (BOT) buys billions of USD to keep the exchange rate at their preferred level. USD is still the preferred trading currency

Sent from my S4 LTE

Remember, you heard it here first!

[phutoie2]

farangs sending money back to their wives and girlfriends.

This is a p*ss take?, anyone?

[MrWorldwide]

No-one has mentioned ASEAN, of which Thailand becomes a leading member from 1st January this year!

God help us if they are the leaders.

It makes sense when you realise who the number one 'leaders' would presumably be, based on GDP and growth projections ....

http://en.wikipedia.org/wiki/Corruption_in_Indonesia

Must make life at that table interesting for the delegation from Singapore - Indonesia and Malaysia on one side and Thailand and the PI on the other. Brown envelopes stuffed with USD, anyone ?

[MrWorldwide]

farangs sending money back to their wives and girlfriends.

This is a p*ss take?, anyone?

Probably, but there are still people here who are convinced that the economy of Thailand is built around sex tourism and the sponsorship arrangements that often result from such encounters. Doesnt matter that the total contribution to GDP made by ALL tourists is less than 10%, even allowing for the flow-on effect - if your neighbour in Nakhon Nowhere just built a new house and has a new pickup in the driveway, that money had to come from somewhere ....

We are discouraged from linking directly to the BKK Post, but they claimed in a story last year that foreign sponsors added 8.7 billion baht to the Isaan GDP figures in 2013 - an average of 9600 baht a month. Double that for a gal in BKK and it's easy to see how some form the opinion that a large chunk of Thailand is being driven by AUD/USD/GBP/Euro pumped into the economy by overseas 'donors'.

[iphad]

If the BOT buys billions of US dollars it would be to weaken the baht..not strengthen it.....and although the comparisons of Baht to the US dollar or Euro is of importance to farang...what's important to Thailand is it's comparison to neighbouring country currencies so that Thailand remains competitive.

[thailiketoo]

If the BOT buys billions of US dollars it would be to weaken the baht..not strengthen it.....and although the comparisons of Baht to the US dollar or Euro is of importance to farang...what's important to Thailand is it's comparison to neighbouring country currencies so that Thailand remains competitive.

Switzerland stopped buying billions of Euros and the Swiss Franc shot up 30%. Isn't that what happened?

[ExPratt]

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If the BOT buys billions of US dollars it would be to weaken the baht..not strengthen it.....and although the comparisons of Baht to the US dollar or Euro is of importance to farang...what's important to Thailand is it's comparison to neighbouring country currencies so that Thailand remains competitive.

Important to me as well , most of my Money is in Malaysia . Gone from 9.8 Baht to 1 Ringgit to 9 to 1 on about 4 months

[Naam]

If the BOT buys billions of US dollars it would be to weaken the baht..not strengthen it.....and although the comparisons of Baht to the US dollar or Euro is of importance to farang...what's important to Thailand is it's comparison to neighbouring country currencies so that Thailand remains competitive.

Switzerland stopped buying billions of Euros and the Swiss Franc shot up 30%. Isn't that what happened?

that's exactly what happened. the Swiss Franc shot up because the Swiss National Bank stopped selling Francs to buy EURos. therefore "iphad" is right with his claim "buying Dollars weakens the Baht".

[Naam]

Bank of Thailand (BOT) buys billions of USD to keep the exchange rate at their preferred level. USD is still the preferred trading currency

Sent from my S4 LTE

Remember, you heard it here first!

i heard it but i don't believe it.

[iphad]

If the BOT buys billions of US dollars it would be to weaken the baht..not strengthen it.....and although the comparisons of Baht to the US dollar or Euro is of importance to farang...what's important to Thailand is it's comparison to neighbouring country currencies so that Thailand remains competitive.

Switzerland stopped buying billions of Euros and the Swiss Franc shot up 30%. Isn't that what happened?

The EU will in the next couple weeks start "Quantitative easing" so they will be printing Euro's to support their failing banks...so then Euros would be used to buy Swiss Francs causing mass inflation..The Swiss saw the writing on the wall & although will be a loss to exports..will protect the weakening of the Swiss currency.

[chiang mai]

If the BOT buys billions of US dollars it would be to weaken the baht..not strengthen it.....and although the comparisons of Baht to the US dollar or Euro is of importance to farang...what's important to Thailand is it's comparison to neighbouring country currencies so that Thailand remains competitive.

But since the foreign currency reserves (USD) have fallen we can conclude that the action taken by BOT was to strengthen THB not weaken it, or perhaps it was to prevent a rapid fall.

[iphad]

If the BOT buys billions of US dollars it would be to weaken the baht..not strengthen it.....and although the comparisons of Baht to the US dollar or Euro is of importance to farang...what's important to Thailand is it's comparison to neighbouring country currencies so that Thailand remains competitive.

But since the foreign currency reserves (USD) have fallen we can conclude that the action taken by BOT was to strengthen THB not weaken it, or perhaps it was to prevent a rapid fall.

I don't pretend to know what BOT is doing...if they sold or reduced their USD foreign reserves...could be for several reasons..for one the US dollar is over priced...so if they bought under valued gold for the US dollars they would be wise..if they sold to pay off debts would be wise too...if they sold to buy back baht for for circulation in the thai economy, that would strengthen the Baht.

I would think it would be better for Thailand if the baht exchange is lower to the benefit of exports...

After the demonstrations & coup in the last year or so, one would think that the Thai economy can't be that great...but then where is anywhere great..the global economy is in a mess

But again it's the comparison to Vietnam,Malaysia & neighbouring countries.

[Lukecan]

Thailand has a huge influx of new money coming in, something which Europe lacks. Money going out of Europe is flowing into Turkey,Thailand,Malaysia,China.The huge expat community in LOS is a good example of this, thousands of you are bringing your pension money and converting it to THB, on the contrary how many thai pensioners are living in Europe? Combination of all these factors are making Euro less valuable and driving the property prices up.Europe is in chronic recession, take Netherlands,Germany,France out of it, and you have a continent which basically produces nothing while paying its citizens very high wages. Countries like Greece,Italy,Spain,Romania,Czech Repubilc are basically sucking blood from the EU without giving back anything, taxpayers in Germany,France,Netherlands are basically providing for these lazy goons. Oh and I forgot Denmark sorry, they also produce decent things, but too small to make any decent impact really. If this trend continues, we'll see euro depreciate even more against other currencies.

On the other hand things in USA are heading for the better, definitely an economy which basically produces everything the mankind needs, no problem of declining birth rate. But europe to say the least is F.U. Cked. I hope Turkey doesnt make the mistake of joining EU, its a sinking ship.

Edited January 19, 2015 by Lukecan

[sandyf]

Much of the oil debt is privately held and much of the investment is equity investment. Oil stocks have fallen off the table already.

I'm not saying there won't be a problem, but unlike Russia, oil is a sideline for the US while oil is "everything" for Russia.

I wonder what Alex Salmond is thinking.

[Robert24]

quote Iphad:

The EU will in the next couple weeks start "Quantitative easing" so they will be printing Euro's to support their failing banks...so then Euros would be used to buy Swiss Francs causing mass inflation..The Swiss saw the writing on the wall & although will be a loss to exports..will protect the weakening of the Swiss currency. unquote.

@ iphad: I've lost you after when you started saying Euros would be uses to buy Swiss francs.causing mass inflation. Can you explain how you arrive at this given everyone worries about deflation in Europe?

[Naam]

quote Iphad:

The EU will in the next couple weeks start "Quantitative easing" so they will be printing Euro's to support their failing banks...so then Euros would be used to buy Swiss Francs causing mass inflation..The Swiss saw the writing on the wall & although will be a loss to exports..will protect the weakening of the Swiss currency. unquote.

@ iphad: I've lost you after when you started saying Euros would be uses to buy Swiss francs.causing mass inflation. Can you explain how you arrive at this given everyone worries about deflation in Europe?

iphad means that the ECB might have to bail out,with "quantitative easing", some EU-banks which have a heavy CHF debit exposure.

[morrobay]

So when the Swiss stopped buying Euros with Franks (QE coming) the Euro/Frank decreased. And if via Euro QE Franks are bought with Euros the Euro/Frank will further decrease.

On the topic: When there was QE in the US. dollars were spent on assets in emerging economies and the Thai baht appreciated.

So now if the BOT is buying baht with dollar reserves that are decreasing then the strong baht is not sustainable

Edited January 19, 2015 by morrobay

[Robert24]

quote Iphad:

The EU will in the next couple weeks start "Quantitative easing" so they will be printing Euro's to support their failing banks...so then Euros would be used to buy Swiss Francs causing mass inflation..The Swiss saw the writing on the wall & although will be a loss to exports..will protect the weakening of the Swiss currency. unquote.

@ iphad: I've lost you after when you started saying Euros would be uses to buy Swiss francs.causing mass inflation. Can you explain how you arrive at this given everyone worries about deflation in Europe?

iphad means that the ECB might have to bail out,with "quantitative easing", some EU-banks which have a heavy CHF debit exposure.

thanks for the explanation. So even if the ECB had to bail out banks in the EU for whatever reasons, this wouldn't cause "mass inflation" as you call it. To the contrary it would be even more deflationary.

[Robert24]

So when the Swiss stopped buying Euros with Franks (QE coming) the Euro/Frank decreased. And if via Euro QE Franks are bought with Euros the Euro/Frank will further decrease.

On the topic: When there was QE in the US. dollars were spent on assets in emerging economies and the Thai baht appreciated.

So now if the BOT is buying baht with dollar reserves that are decreasing then the strong baht is not sustainable

ECB won't buy swiss francs as a result of QE. ECB will purchase Euro denominated EU government bonds and potentially some other products such as corporate bonds in the Eurozone or potentially some equities. They won't buy Swiss francs or Swiss franc denominated products.