Why Does the Thai Baht Continue to be So Strong?

[jeanpierre]

ESPECIALLY would I want to drag the USA into this scenario.

- Geographical over expansion.

- Financial over expansion. (The astronomical budget-deficits are mostly covered by the rest of the world) and not by US-Citizens and their meager savings.

- The Influx of people from south of the Rio Grande will eventually have the same effect as 1600 years ago has happened the roman- empire.

Not ever have I seen such striking parallels in history as compared to the US of today versus the "the fall of the roman empire".

Same story, same outcome.. Except this time it happens in our lifetime.

Cheers.

You're nuts!

The Roman Empire fell due to invasion of goths, visigoths and because their army was weak.

As an American, I see people willing to give their lives so that their family has a green card. I see an army that is reasonably modern. I see no Canadian or Mexican army invading.

What do you think will cause us to collapse? Rising Oceans because of global warming? Ok maybe that's it.

Less crack and more swiss cheese!

immigration my friend out of controle

[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

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.

I only said if Franks are bought with Euros @ iphad post #141 ( that I dont understand either) . And only interpreted as is common knowledge that buying a currency appreciates it.

In contrast to some of the other theories above.

Edited January 19, 2015 by morrobay

[Naam]

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.

if they bail out banks with overexposure of CHF (as TV-member "iphad" suggests) it is highly likely that these bail-out EURos will be used by those banks to buy CHF.

[iphad]

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?

What I meant ...is the Euro after "quantitative easing" means the Euro will print money..lots of it...similar to what Japan is going through now..so the Euro will be worth less...so it would take..as it already is from recently unpegging Swiss franc to the Euro...more Euros to buy Swiss Francs..so inflation for imported goods and probably Euro will go down in value to other currencies too.

If the Swiss...by their unpegging to the Euro...have lost confidence in the Euro...it's probably a sure sign that not all is well with the Euro.

The Swiss didn't want the Euro to be exchanged for Swiss Francs at the previous pegging as this would cause inflation because the Swiss would have to print more Francs too.

The US is allowed to print money & stay high in value ..for now...because they are the World's trade currency...roughly 60% of all trade in the world is in US dollars.

I mean inflation to the currency...or in the case of the Euro..it will be worth less.

I am not an economics expert so this is my opinion of what's going on.I spend a few hours everyday reading politics of the world.

Meaning ...don't sell your race horse on my opinion.

[MaiChai]

Last I looked the other day the US, Canada and Aussie $ had all dropped... two or three baht...

One does have to wonder why, the baht is so strong, for sure~ !

I to am watching the Canadian dollar bleed against the Thai baht and am puzzled. The Set is holding its own as well. I think the baht is linked to the American dollar in some way. The economy here does not look all that promising. The yen, euro, ruble have dropped so that will mean a big drop in tourism. A lot of the car manufacturers are looking elsewhere to set up shop consumers are loaded with debt. Chiang Mai is overbuilt so I would presume the rest of the country is to. We have no water for all the new buildings going up and God knows where the sewage is going I even hate to speculate about this one. I say a prayer each time I pull the handle. Pollution is building and they want to build more coal fired power plants in the future. My crystal ball imploded. The whole world is crazy.

Urbanization of Thailand is ugly? Just got out of Bangkok after 10 years and moved up to Khon Kaen. What a breath of fresh air! Whole of outer Bangkok either way (N,E,W) is pretty horrible. Not to mention the cost of living down there!

[marcusd]

Thailand has been super stable, since Prayuth took over. I don't see financial disaster/bankruptcy or collapse of the economy, on the horizon. Thus, a stable baht.

Would it be more beneficial for the exporters to have a weaker baht?

[marcusd]

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.

Yes but thailands major export markets are hurting and soon enough that pain too, must flow to Thailand?

[marcusd]

Simple enough really, lots of tourists now in high season spending foreign money, which has to be converted into Thai baht. Simple supply/demand market.

All western currencies are lower. When the low season kicks in shortly, things will improve.

This is what I thought but I think,the government is trying to reduce foreign influences so bu hurting foreign companies they keep the baht high, get rid of foreign companies and keep control of the even poorer masses.

I hope you are right and I am wrong

[marcusd]

BOT is the answer. Using FX reserves to prop up the Baht. Quite a stupid policy but what to expect from a smart government

I am not being rude, but what else do,you use FX reserves for?

[marcusd]

You feel this is the place to ask such a question ?

Thai Visa ? Have you read some of the offerings by the members of this forum ?... and their replies !!

If you had, you wouldn't even ask where the next street is let alone future predictions for foreign exchange.

Amazing !

It's a good a place as asking WORLD LEADING ECONOMISTS who all differ.

So why not here?

It's fun to play

[Naam]

Thailand has been super stable, since Prayuth took over. I don't see financial disaster/bankruptcy or collapse of the economy, on the horizon. Thus, a stable baht.

Would it be more beneficial for the exporters to have a weaker baht?

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

[Xircal]

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

I doubt that. Thailand is an exporting nation and a strong Baht is no good for exports.

But wait until tomorrow when EU president Mario Draghi makes his plans for QE known. That (I hope) will strengthen the Euro which has been dropping like a stone just lately which will be good for exporting nations like Thailand.

[zierf1]

It's moving in lockstep with the Yuan. Anybody notice this?

[Diplomatico]

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

I doubt that. Thailand is an exporting nation and a strong Baht is no good for exports.

But wait until tomorrow when EU president Mario Draghi makes his plans for QE known. That (I hope) will strengthen the Euro which has been dropping like a stone just lately which will be good for exporting nations like Thailand.

QE will do just the opposite....weaken the Euro further. Add massive amounts to the supply of Euros available? Price goes down.

[JB300]

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

I doubt that. Thailand is an exporting nation and a strong Baht is no good for exports.

But wait until tomorrow when EU president Mario Draghi makes his plans for QE known. That (I hope) will strengthen the Euro which has been dropping like a stone just lately which will be good for exporting nations like Thailand.

QE will do just the opposite....weaken the Euro further. Add massive amounts to the supply of Euros available? Price goes down.

That's my belief also, focus is on stimulating inflation (or at least avoiding deflation), they don't seem to care about exchange rates.

However, as the intention to start QE is well known, a lot of the impact will baked into the exchange rate already so if the amount of QE is below what's been predicted/expected (I see Germany is opposed to it) then the Euro could go up.

Edited January 22, 2015 by JB300

[sandyf]

It's moving in lockstep with the Yuan. Anybody notice this?

You must be looking at a different Yuan.

We have to pay university fees in yuan and it has been up and down over the last 2 years. We try and buy some every time we think it has hit a low.

Chinese announced this morning they have done a deal to set up Yuan clearing in Switzerland.

[sandyf]

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

I doubt that. Thailand is an exporting nation and a strong Baht is no good for exports.

But wait until tomorrow when EU president Mario Draghi makes his plans for QE known. That (I hope) will strengthen the Euro which has been dropping like a stone just lately which will be good for exporting nations like Thailand.

QE will do just the opposite....weaken the Euro further. Add massive amounts to the supply of Euros available? Price goes down.

Agreed, that is why the Swiss baled out, Denmark may well do the same.

[thailiketoo]

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

I doubt that. Thailand is an exporting nation and a strong Baht is no good for exports.

But wait until tomorrow when EU president Mario Draghi makes his plans for QE known. That (I hope) will strengthen the Euro which has been dropping like a stone just lately which will be good for exporting nations like Thailand.

QE will do just the opposite....weaken the Euro further. Add massive amounts to the supply of Euros available? Price goes down.

Agreed, that is why the Swiss baled out, Denmark may well do the same.

Above was written, 1."That (I hope) will strengthen the Euro which has been dropping like a stone just lately which will be good for exporting nations like Thailand." 2. "QE will do just the opposite....weaken the Euro further." 3. "Agreed."

The above is interesting; written yesterday. So what happened; who was correct?

[SheungWan]

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

I doubt that. Thailand is an exporting nation and a strong Baht is no good for exports.

But wait until tomorrow when EU president Mario Draghi makes his plans for QE known. That (I hope) will strengthen the Euro which has been dropping like a stone just lately which will be good for exporting nations like Thailand.

QE will do just the opposite....weaken the Euro further. Add massive amounts to the supply of Euros available? Price goes down.

You mean like QE weakened the USD?

[Time Traveller]

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

I doubt that. Thailand is an exporting nation and a strong Baht is no good for exports.

I doubt that. The BoT jump to the tune of the military now. The military needs a strong baht to save money on the purchase of jets, tanks, submarines, and warships. Whatever is good for business plays no role in the military's decision making. So better get used to the strong baht for a while.

Edited January 23, 2015 by Time Traveller

[Anthony5]

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

I doubt that. Thailand is an exporting nation and a strong Baht is no good for exports.

But wait until tomorrow when EU president Mario Draghi makes his plans for QE known. That (I hope) will strengthen the Euro which has been dropping like a stone just lately which will be good for exporting nations like Thailand.

QE will do just the opposite....weaken the Euro further. Add massive amounts to the supply of Euros available? Price goes down.

You mean like QE weakened the USD?

Yeah right you are, for once, because the dollar only started to strengthen after they ended the QE.

During the period of QE it weakened continuously against all major currencies.

[Naam]

Yeah right you are, for once, because the dollar only started to strengthen after they ended the QE.

During the period of QE it weakened continuously against all major currencies.

for the record:

U.S. quantitative easing stopped in november 2014 (last batch was issued in october). US-Dollar strengthening started already in may 2014,

appreciation vs. €UR during QE = 10.2%

appreciation vs. JP¥ during QE = 16.8%

appreciation vs. GB£ during QE = 5.7%

appreciation vs. AUD during QE = 6.4%

[sandyf]

Yeah right you are, for once, because the dollar only started to strengthen after they ended the QE.

During the period of QE it weakened continuously against all major currencies.

for the record:

U.S. quantitative easing stopped in november 2014 (last batch was issued in october). US-Dollar strengthening started already in may 2014,

appreciation vs. €UR during QE = 10.2%

appreciation vs. JP¥ during QE = 16.8%

appreciation vs. GB£ during QE = 5.7%

appreciation vs. AUD during QE = 6.4%

Quoting currency pairings is just unrealistic, too many variables.

The US QE started at the end of 2008 when the dollar index was about 88, within 12 months it had dropped to around 75. In 2010 it rose again to over 80 but was short lived and by mid 2011 back down to around 72. It took a further 3 years to crawl back up to the 80 mark in Aug of 2014. About then talk of terminating QE started and in the space of 4 months shot up significantly.

Two indisputable facts about the QE, significant fall in the dollar index when it started, and a significant rise when it came to an end.

[Thai at Heart]

Last I looked the other day the US, Canada and Aussie $ had all dropped... two or three baht...

One does have to wonder why, the baht is so strong, for sure~ !

I to am watching the Canadian dollar bleed against the Thai baht and am puzzled. The Set is holding its own as well. I think the baht is linked to the American dollar in some way. The economy here does not look all that promising. The yen, euro, ruble have dropped so that will mean a big drop in tourism. A lot of the car manufacturers are looking elsewhere to set up shop consumers are loaded with debt. Chiang Mai is overbuilt so I would presume the rest of the country is to. We have no water for all the new buildings going up and God knows where the sewage is going I even hate to speculate about this one. I say a prayer each time I pull the handle. Pollution is building and they want to build more coal fired power plants in the future. My crystal ball imploded. The whole world is crazy.

Urbanization of Thailand is ugly? Just got out of Bangkok after 10 years and moved up to Khon Kaen. What a breath of fresh air! Whole of outer Bangkok either way (N,E,W) is pretty horrible. Not to mention the cost of living down there!

Hahaha, I just left Khon Kaen partly because the big families of KKC were set upon making one part of town as congested as Sukhumvit by placing 10 condos and a shopping centre in one square kilometre.

[Thai at Heart]

yes it would but it is also beneficial to importers to have a stronger Baht. in the first 10 months of 2014 the trade balance was negative ($1.855 billion) which is peanuts compared to the total trade but evidence that more was imported than exported.

bottom line: the present Baht "strength" is quite acceptable for the BoT.

I doubt that. Thailand is an exporting nation and a strong Baht is no good for exports.

I doubt that. The BoT jump to the tune of the military now. The military needs a strong baht to save money on the purchase of jets, tanks, submarines, and warships. Whatever is good for business plays no role in the military's decision making. So better get used to the strong baht for a while.

Thailand likes at least a stable baht or a relatively strong baht.

When the baht was 28 the exporters moaned. Now its 33 did exports boom? Um, nope.

Thailand cannot normally cheapen its exports that much by devaluation because they import so many raw materials and inputs. But oil is cheap now so maybe they get some breathing apace.

You think Thai exporters will pass the fuel savings onto buyers??? Lol

So, if your Thai holiday was 1200 GBP before spenders for a week, do you expect a massive jump in arrivals if it drops to 1100? No me neither.

[Lancelot]

Thailand is a relatively large importer of oil and the huge decrease in the price of that commodity has contributed to the Baht's recent strength...

[millwall_fan]

The Baht is strong because that is the policy of the Thai Monetary Policy Committee and the Bank of Thailand. A strong Baht benefits the rich, who can invest cheaply in foreign markets and property (in case the balloon eventually goes up?), buy cheap foreign cars and take cheap foreign holidays: in short it suits the friends and family of the MPC and the ruling elite of which they are members.

It was the strong baht, as much as corruption, that was responsible for the failure of the rice scheme: a weaker Baht - which the finance minister Kitirat na Ranong repeatedly called for, would have enabled the country to have sold the rice it bought under pledge at a profit or only a small loss; however the MPC (which was independent of government) refused to lower interest rates, leading to it being impossible to sell the country's rice abroad. It could easily be argued that this was a blatanlty political move to destabalise the Yingluck government.

The poor, of course were sidelined by the coup and don't count, in the formation of monetary policy.

[chiang mai]

Utter tosh!

FWIW THB is strong because solely as a result of demand, just like any other currency, the greater the demand, the more currency is purchased and the stronger that currency becomes.

And BOT has spent more of it's foreign currency reserves trying to weaken THB than at any time in recent history, hardly once has it actually sold THB from reserves in an attempt to strengthen it.

And and, the MPC does not adjust lending rates in order to suit family and friends on their shopping trips, I know this is a difficult concept to embrace but they actually do so based on the state of the country's economy, an under performing economy requires a lower lending rate whilst an over heating economy requires a higher one.

After all these years MF, you still churn out this conspiracy theory nonsense about the rich elite, god it must be wretched to have a chip that size on your shoulder!

[millwall_fan]

Utter tosh!

FWIW THB is strong because solely as a result of demand, just like any other currency, the greater the demand, the more currency is purchased and the stronger that currency becomes.

And BOT has spent more of it's foreign currency reserves trying to weaken THB than at any time in recent history, hardly once has it actually sold THB from reserves in an attempt to strengthen it.

And and, the MPC does not adjust lending rates in order to suit family and friends on their shopping trips, I know this is a difficult concept to embrace but they actually do so based on the state of the country's economy, an under performing economy requires a lower lending rate whilst an over heating economy requires a higher one.

After all these years MF, you still churn out this conspiracy theory nonsense about the rich elite, god it must be wretched to have a chip that size on your shoulder!

Er? Are you saying there is no conspiracy by the ruling elite to prevent the masses from having a say in the running of the country? That there was no collusion between Mr Suthep, the military and the amart in the mounting of the coup d'etat? That this collusion does not extend to the financial sector? If you are, then you are living in cloud cuckoo land, my friend.....

[chiang mai]

Utter tosh!

FWIW THB is strong because solely as a result of demand, just like any other currency, the greater the demand, the more currency is purchased and the stronger that currency becomes.

And BOT has spent more of it's foreign currency reserves trying to weaken THB than at any time in recent history, hardly once has it actually sold THB from reserves in an attempt to strengthen it.

And and, the MPC does not adjust lending rates in order to suit family and friends on their shopping trips, I know this is a difficult concept to embrace but they actually do so based on the state of the country's economy, an under performing economy requires a lower lending rate whilst an over heating economy requires a higher one.

After all these years MF, you still churn out this conspiracy theory nonsense about the rich elite, god it must be wretched to have a chip that size on your shoulder!

Er? Are you saying there is no conspiracy by the ruling elite to prevent the masses from having a say in the running of the country? That there was no collusion between Mr Suthep, the military and the amart in the mounting of the coup d'etat? That this collusion does not extend to the financial sector? If you are, then you are living in cloud cuckoo land, my friend.....

I am stating categorically that there is no conspiracy or collusion by BOT and/or the MPC to keep THB unnaturally strong and that interest rates are determined by economic need alone.

BOT's stated policy on exchange rates is that it will intervene in markets to smooth out any volatility, in order to protect exports and this is what they have done. If they had been doing what you suggest BOT would have been buying THB on a large scale and to do that they would have had to sell USD from their foreign currency reserves - please show me where they have done this.

https://www.bot.or.th/English/Statistics/EconomicAndFinancial/Pages/StatInternationalReserves.aspx