Thailand takes a hammer to the baht

[mikiea]

"All three things marked a strong message,"

I had to read the article several times to make sure I didn't miss it, but I only found TWO things..."reduce interest rate" and "ease capital controls". Can someone point out the 3rd thing they did?

huh.... they went to s bucks to talk about it .

[lostoday]

That's what countries do. It is called economic foreign policy. The largest example recently was Switzerland. Why do some folks think it is some kind of scam or scheme? The Fed and the BOT of Thailand change interest rates, that is what they do.

[mercman24]

thankyou very interesting chart £ v Baht

[Freed1948]

Today got 25.47/$Oz 12 months ago it was 28.5/$oz.

[HerbalEd]

The concern is the baht's appreciation against regional currencies.

So do not hope for a large fall against the dollar or pound.

I'm responding to your post 4 hrs. 30 min. later and indeed the baht has fallen significantly against the dollar. Last week it was 32.4/$1 and now it's 33.15/$1. And while I don't wish bad on Thailand, this puts a big smile on my face.

[Time Traveller]

When was the last time the BOT wanted to support the currency? Is he nuts?

Well I questioned that comment also.

But it appears that with last week's lower interest rates, and also the more generous allowances for Thais to send money abroad for foreign investment, that is does appear the BoT is providing less support for the Baht, even if they were not actually using their fx reserves to do so..

[trogers]

The concern is the baht's appreciation against regional currencies.

So do not hope for a large fall against the dollar or pound.

There has already been quite a large fall against the pound - 4 baht in a few days.

Analysts call this technical correction, not long term trend.

[trogers]

When was the last time the BOT wanted to support the currency? Is he nuts?

Well I questioned that comment also.

But it appears that with last week's lower interest rates, and also the more generous allowances for Thais to send money abroad for foreign investment, that is does appear the BoT is providing less support for the Baht, even if they were not actually using their fx reserves to do so..

How does the use of fx helps to weaken one's own currency? Burning them?

[lostoday]

When was the last time the BOT wanted to support the currency? Is he nuts?

Well I questioned that comment also.

But it appears that with last week's lower interest rates, and also the more generous allowances for Thais to send money abroad for foreign investment, that is does appear the BoT is providing less support for the Baht, even if they were not actually using their fx reserves to do so..

I'm sure you all know more than I about this stuff but it seems to me the BOT has been trying to keep the baht low for the past ten years. In my way of thinking that is not support that is weakness. The BOT does not want a strong baht. Maybe I'm mixing up my terms but I thought support meant strength and lack of support meant weakness.

Edited May 6, 2015 by lostoday

[phrisco17]

From April 30 to this morning the baht has taken a hammering.

At the time of your posting the Baht hadn't been traded yet since 30 April.

Edit: Just notice that the first round of exchange is 7am. Wonder how they do this as the financial markets in Thailand are still closed at that time.[/quote

Currency is traded around the world 24 hours a day except on weekends. The Thai market may be closed but the baht is still being traded in the U.S. and the EU as an example.

[Time Traveller]

When was the last time the BOT wanted to support the currency? Is he nuts?

Well I questioned that comment also.

But it appears that with last week's lower interest rates, and also the more generous allowances for Thais to send money abroad for foreign investment, that is does appear the BoT is providing less support for the Baht, even if they were not actually using their fx reserves to do so..

How does the use of fx helps to weaken one's own currency? Burning them?

Central banks own the currencies of foreign nations. The Dollar being the major component. By selling baht and buying dollars it can attempt to weaken the baht, or it can sell dollars from it's reserves to buy buy baht to attempt to strengthen the baht. However, the latter is limited by the amount of dollars they own.

Burning baht in enough quantity would actually make the value of baht stronger as it reduces the supply of baht currency in circulation.

[elgordo38]

From April 30 to this morning the baht has taken a hammering.

Long overdue and there should be another 10 to 20% to come. The sad part as a saver (my curse to bear as I did not enjoy my money during my productive years. I should have spent it and could now run to the bank and borrow money for almost nothing) I will loose out as the banks here will hammer interest rates. Thailand has finally joined the currency race to the bottom. Its more than just currency racing to the bottom its morale values as well.

Edited May 6, 2015 by elgordo38

[rijit]

The concern is the baht's appreciation against regional currencies.

So do not hope for a large fall against the dollar or pound.

Have no fear. If labour win the coming UK election the pound will nosedive without any outside help.

Thought the exact opposite happened last time labour took over from the tories

Sent from my GT-I9000 using Thaivisa Connect Thailand mobile app

[lucky11]

The concern is the baht's appreciation against regional currencies.

So do not hope for a large fall against the dollar or pound.

Have no fear. If labour win the coming UK election the pound will nosedive without any outside help.

No party will win the election.

[rijit]

The concern is the baht's appreciation against regional currencies.

So do not hope for a large fall against the dollar or pound.

Have no fear. If labour win the coming UK election the pound will nosedive without any outside help.

No party will win the election.

Yeah, the martians are coming!!!

Sent from my GT-I9000 using Thaivisa Connect Thailand mobile app

[oneday]

"All three things marked a strong message,"

I had to read the article several times to make sure I didn't miss it, but I only found TWO things..."reduce interest rate" and "ease capital controls". Can someone point out the 3rd thing they did?

Me too. I just read it again. Here is a suggestion:

1. BOT reduces interests rates by .25%

2. BOT puts out a statement mentioning it is concerned about the strength of the baht

3. BOT eases some capital controls

"The Bank of Thailand (BOT) last week sent a triple whammy to the markets: In a surprise move, it cut its benchmark interest rate by 25 basis-points to 1.5 percent. In its statement, the BOT mentioned its concerns about the continued strength of the baht. That was followed up with the easing of some of the country's capital controls, which will allow more funds to flow out of the country."

I think you and the reporter are pushing it to call the STATEMENT the third thing they did, but I'll grant you that may be what he was referring to. I certainly would not attribute a statement as having even close to the same impact as 1 and 3.

[JB300]

From April 30 to this morning the baht has taken a hammering.

Long overdue and there should be another 10 to 20% to come. The sad part as a saver (my curse to bear as I did not enjoy my money during my productive years. I should have spent it and could now run to the bank and borrow money for almost nothing) I will loose out as the banks here will hammer interest rates. Thailand has finally joined the currency race to the bottom. Its more than just currency racing to the bottom its morale values as well.

All the more reason to take the measly return we get nowadays & enjoy it all the more [emoji106][emoji106][emoji106]

[Eric Loh]

Fitch report on Thai Baht

05 May 2015 9:30 PM

Thai Rate Cut No Panacea for Feeble Economy

https://www.fitchratings.com/gws/en/fitchwire/fitchwirearticle/Thai-Rate-Cut?pr_id=984161

Fitch Ratings-Hong Kong/Singapore-05 May 2015: The Thai central bank's decision last week to cut the policy rate and relax capital account restrictions highlight the persistent weakness of Thailand's economic outlook, says Fitch Ratings. Thailand's credit risk profile balances the country's relatively weak macroeconomic performance against a strong policy framework, and the recent policy action does not change that fundamental assessment.

The Bank of Thailand (BoT) surprised the market by cutting the policy rate by 25bp to 1.50% on 30 April, and then eased rules on Thai residents' foreign investments and non-residents' ability to borrow in baht, effective 1 May. The central bank's decisions came as weak demand and production indicators point to a lackluster economic recovery after growth fell below 1% last year amid political uncertainty and disruption.

Fitch expects Thai real GDP growth to accelerate to 3.5% and 3.7% in 2016. However, structural issues, including relatively high household debt and lingering political uncertainty weigh on domestic demand, and could turn out to be more serious in their effect than current forecasts anticipate.

The central bank cited the strength of the Thai baht to explain its rate cut. This was unusual as the BoT has not recently cited the exchange rate as a driver of monetary policy actions. The baht appreciated 4.3% on a trade-weighted basis in 1Q15, compared with a 1.1% depreciation for the median of 22 major emerging-market economies. This was in part caused by Thailand's hefty current-account surplus, which was USD8.2bn in 1Q15. This, in turn, reflects the weakness of domestic demand. This will contend with the announced measures to spur capital outflows in exerting an influence on the currency.

A cheaper baht is unlikely to be a panacea for Thailand even if it can be achieved. Gross exports in Thailand have not grown since 2012, according to official data, suggesting a broader, structural decline in competitiveness. We highlighted the ability of Thailand's export industries to improve their competitiveness as a potential key factor that affects ratings in our recent sovereign review published in April.

The ability of rate cuts to spur demand is also likely to be limited by the already high level of private-sector indebtedness. Bank credit to the Thai private sector totaled 159% of GDP in 2014, up from 113% in 2008. That is substantially higher than the median 61% of its 'BBB' rated peers, and even tops the medians for 'A'-rated (107%) and 'AA'-rated (110%) sovereigns. Household indebtedness is likely to drag on consumption.

Thailand's net international investment position (NIIP) is negative as foreign direct investment into Thailand - counted as a liability - more than offsets the country's net asset position in debt-like instruments. Easing capital account restrictions to facilitate cross-border capital flows could boost Thailand's NIIP over time. But Fitch sees limited upside from this for the credit profile as we already regard Thailand's external finances as a strength. A large current account surplus, status as a net external creditor in debt-like instruments, and robust external liquidity buffers provide the economy substantial protection from external shocks.

The BOT has in the past resisted calls by Finance Ministers to cut or increase the rate and have always stated that the exchange rate was never a driver of monetary policy. This time they relented and I suspect that the independence of BOT has been compromised. The knee jerk reaction may benefit Baht depreciation but judging from the USA muted economic results and their high budget deficit plus the positive current account that Thailand enjoyed, the Baht will gain strength eventually.

[trogers]

When was the last time the BOT wanted to support the currency? Is he nuts?

Well I questioned that comment also.

But it appears that with last week's lower interest rates, and also the more generous allowances for Thais to send money abroad for foreign investment, that is does appear the BoT is providing less support for the Baht, even if they were not actually using their fx reserves to do so..

How does the use of fx helps to weaken one's own currency? Burning them?

Central banks own the currencies of foreign nations. The Dollar being the major component. By selling baht and buying dollars it can attempt to weaken the baht, or it can sell dollars from it's reserves to buy buy baht to attempt to strengthen the baht. However, the latter is limited by the amount of dollars they own.

Burning baht in enough quantity would actually make the value of baht stronger as it reduces the supply of baht currency in circulation.

It's fx reserve is made up of foreign currencies. They can sell to strengthen. But they cannot use the fx reserve to weaken the Baht, unless by burning the reserve.

Like you said, they have to sell Baht to weaken it. Now, where can they get enough Baht short of printing more out of thin air?

[wooloomooloo]

Got lucky this last few days. THB/GBP was obviously hovering at 47/48 for last few weeks then closed last Thursday night at 50.09 at Bangkok Bank for the long weekend. Travelled to LOS last Saturday and picked up the prevailing weekend rate on Monday at the Bangkok Bank currency exchange counter in PHS [yes, it was open]. Changed up our estimated holiday cash in one fell swoop. Just couldn't see the rate appreciating any more, for this week at least.

Closed at 49.71 today so was excellent timing for us. As long as we're getting £20/1000 baht in the current climate, we're more than happy.

[Naam]

I am quite happy with the gains. It went from $CDN 25.5 to $27.5 in just 2 weeks.

I was wondering what the reason was.

CAD is a commodity currency which strengthened with the price of crude oil.

[Hobiecat]

The concern is the baht's appreciation against regional currencies.

So do not hope for a large fall against the dollar or pound.

Ah..........it's basic mathematics if the Baht depreciates against local currencies. It's going to do the same world wide against most currencies. It may not be a huge percentage but it will be helpful and welcomed none the less.

Edited May 6, 2015 by Hobiecat

[anon7867763]

Today got 25.47/$Oz 12 months ago it was 28.5/$oz.

Australia just cut it´s base rate so I doubt you will see much gain from this scenario

[rijit]

'A hammer' thats slightly OTT It's still hovering around the 50 ish to sterling Hardly an earth shattering change.

Sent from my GT-I9000 using Thaivisa Connect Thailand mobile app

Edited May 7, 2015 by rijit

[Naam]

Today got 25.47/$Oz 12 months ago it was 28.5/$oz.

Australia just cut it´s base rate so I doubt you will see much gain from this scenario

AUD strengthened vs. THB and most other currencies inspite of the rate cut.

[IMA_FARANG]

Yes, I know.

My funds for my monthly pension in U.S. dollars were transferred on 4 May, and it is in the queue at Bangkok Bank,

Yesterday the 6th of May the main bank was open in Silom road, where the international transfers are processed but my 4 May transfer was not processed yesterday.

The reason I was given by the bank was that there were to quote the teller "to many transactions in the queue so my incoming transaction could not be processed".

The dollar to Baht rate they had listed yesterday was 32.8 baht to a dollar, but as I said the incoming funds transfer was not processed yesterday before 3 p.m.

I will see if it is processed today or not.

I believe Bangkok Bank was deliberately delaying processing dollar to Baht transactions yesterday hoping to be able to get a better dollar to Baht rate today.

Hopefully they will be wrong, and it will cost them a few more Baht today than yesterday.

The computer log shows my incoming funds arrived on 4 May..... I know that the 4th and 5th were holidays and the main bank in Silom was closed those two days

They were open on the 6th, and you would expect them to start processing incoming transfers when the bank opened at 8 a. m, but they still hadn't processed my incoming transfer by3 p.m. yesterday...... and I believe they are deliberately delaying processing incoming transfers hoping for a better (lower) dollar Baht rate today or tomorrow.

Fork them.

Edited May 7, 2015 by IMA_FARANG

[Naam]

The computer log shows my incoming funds arrived on 4 May...

then you should get the rate of may 4 because processing and queues are not affecting the value date. of course that's the international handling but the handling by Thai banks might be different

[Naam]

Fork them.

don't fork them. if they apply today's rate you win

[TheAppletons]

IMA_FARANG: The TT rate at Bangkok Bank - which is the rate you'll receive for your transfer - was well over 33 yesterday (It's 33.18 this morning.) 32.8 was undoubtedly for cash.

If you think Bangkok Bank was deliberately delaying the deposit of your transfer "hoping for a better (lower) dollar Baht rate today or tomorrow..." then you think Bangkok Bank has the ability to predict the future since the rate could go either up or down. Doubtful, huh?

[metisdead]

A post containing an oversize image has been removed as it messed up the formatting of this page.