USD:THB where is it headed and why?

[spaceman79]

I was looking at the long term graph of the THB against USD. It is now dangerously near the last two lows against USD sometime btw 2008-2009. That was when the sub prime crisis was in full swing. Now interesting thing is this time no such crisis looms in the horizon but the THB like many other currencies is losing value. The MYR is at its 17 year low against the USD. So if USD THB breaches 35.9 then its headed for USD THB at 41 the 10 year low of THB against USD. Interestingly Thailand lowered its interest rate in the last 12 months and now in my view in USD terms the real deposit rate is negative, in THB terms its just about 2.5-2.75% for 1 year deposits, as the actual inflation is -1.05% as of June, 2015. However the rapidly depreciating THB against the USD is surely to take inflation higher in the coming months as the country is energy deficient and imports most of its fuel. Meanwhile i saw on tv the Malaysian finance minister assuring that the Malaysian economy is on a much stronger footing since 1997 as their foreign reserve is 3 times their foreign reserve in 1997. Sounds assuring but then why the MYR is at its 17 year low against USD?? What is the answer?? For now it seems to me THB will get some support at its current levels but 35.9 will be breached even though Thailand is a net creditor nation, its foreign debt is USD 50 billion less then foreign assets held by Thailand abroad. I think i can see now why dirty floats are not so bad. I think part of the THB losing value is speculative in nature and has not bearing on the real fundamentals of the THB. Why do you think THB is losing and where will it stabilize in the near/mid/long term?

[Time Traveller]

THB more or less follows what's happening with other asian currencies. There has been capital flowing out of Asian countries and into dollars due to the carry trade unwind. And a lot of foreign money has been invested into Thailand so despite being a creditor nation, it still risks capital outflow and currency depreciation.

Eventually even China will need to devalue the RMB to keep the export sector alive. The reason for their delay is that many Chinese corporations have USD debt obligations, and we all know how that played out during the 1997 Asian crisis.

Effectively, being a net creditor nation with trade surpluses means nothing for currencies these days because the countries that run them decide they prefer to help their export sector than let their currencies appreciate. Hence, China, Japan, and other Asian countries will countinue to devalue their currency as a stronger currency makes no sense.

While China claim they want the RMB to be an international reserve currency, the truth is that won't happen until it is freely traded without exchange regulations. Do you think they will ever willingly give up control over their currency?

In the meantime, the USD remains supreme.

[NeverSure]

Perhaps it would be wise to look up the definition of "net creditor nation". Perhaps it would be wise to try to understand why a nation has "foreign reserves" regardless of its debt level.

The things that are affecting the baht are mostly perception. Capital might flee an unstable government, selling baht to do so. That might also be seen in businesses slowing or leaving and of course in investments like the stock market. Baht is sold for other money to leave the country. There are more sellers than buyers of baht in the investment sector not limited to the stock market.

There's also the perceived rate of inflation. One would want to hedge against that if holding baht and if he thought inflation would eat into his capital.

Then there are interest rates that can affect whether people want to own baht.

Then there's the perception of safety.

There's the balance of trade. Current accounts are involved in that matter too.

Of course there's the government debt to consider.

There's the relative value of items exported and imported. Not the total amount but the value of each item. It's hard to trade low value rice for high value goods without causing a lot of outflow of baht. Of course the baht is first converted to something negotiable such as $USD but it is still exported. Still, it's hard to buy oil with rice. ME countries which have oil rather than rice are obviously ahead of the game.

There's the overall economy. Is it going into recession? Do you want your money there?

In the end it's still perception because the baht is a commodity of sorts. You have to have willing buyers and sellers and more buyers will raise the price. Buyers occur on an upswing when people want to invest in a country. Forex is just another market needing willing buyers and sellers.

Cheers.

[HerbalEd]

Re. your "So if USD THB breaches 35.9 then its headed for USD THB at 41 the 10 year low of THB against USD."

Why do you consider 35.9 baht per USD the magic number here? Why not 35.4? And how do you know reaching that number necessarily means the baht is headed to 41?

[spambot]

My over generalized Answer:

When a central bank increases its central rate the value of its currency goes up (and vice versa)

Since Fed Chair Janet Yellen is on record as saying Fed rates will increase this year (possibility at Sept Fed meeting or November) from the current 0% rate the FX trade is now reflecting this in the anticipated of the hike in September.

The reason why specifically EM's like Thailand suffer is that currency will normally flow away from most EM currencies and into the developed markets that is hiking their central bank rate - In this case it is the USD.

In short it is a simple supply and demand effect on the THB - There are more sellers than buying for THB and more buyers than sellers for the USD (within the USD/THB currency pair)

for more detail watch this video since it describes the effect on equities and Bonds as well as FX - On EM's

http://video.cnbc.com/gallery/?video=3000401850

[marcusd]

I think you have a LOT of presumption here and why worry? Do you have zillions invested here? then I would worry.

[1FinickyOne]

My guess would be that the largest factor in the strength of dollar/baht is that interest rates will be going up soon in USA and have been going down here - the baht has remained strong while other Asian currencies have faltered.

Markets seem to flow in tides - I am not big on charting but the rise looks steep and factors could point toward that 40 level many of us would like to see...

[carib102]

There are many reasons why and a good number of them have been covered above. U.S. telegraphing rate hikes, Thailand telegraphing rate cuts, weak stock market causing outflows of capital, weak exports (falling for 3 consecutive years), increasing inflation, and falling foreign reserves are just some of the reasons. I don't believe that speculators are heavily short the THB at this time, but if that happens you will see 41-42 faster than you could imagine as Thailand has little recourse to protect the THB from a concerted effort from speculators to send it lower. The greatest probability is that the USD/THB will continue to trade in the 35-36 range until the September Federal Reserve meeting. If no cut it might pull back a bit (assuming there's no blow up in the Thai economy or political situation), and if the Fed does cut I believe the USD/THB could hit 38, at least on a short term basis as speculators punish emerging markets in general. Just my 2 cents though...

[bazza40]

My over generalized Answer:

When a central bank increases its central rate the value of its currency goes up (and vice versa)

Since Fed Chair Janet Yellen is on record as saying Fed rates will increase this year (possibility at Sept Fed meeting or November) from the current 0% rate the FX trade is now reflecting this in the anticipated of the hike in September.

The reason why specifically EM's like Thailand suffer is that currency will normally flow away from most EM currencies and into the developed markets that is hiking their central bank rate - In this case it is the USD.

In short it is a simple supply and demand effect on the THB - There are more sellers than buying for THB and more buyers than sellers for the USD (within the USD/THB currency pair)

for more detail watch this video since it describes the effect on equities and Bonds as well as FX - On EM's

http://video.cnbc.com/gallery/?video=3000401850

I see this as a game of pea and thimble, or poker bluffing. Every time the Fed chair opens her mouth and hints at an interest rate rise " in the near future " , the US dollar as a reserve currency strengthens against most other currencies. I'll believe it when I see it happen. There is no evidence the American economy is so healthy it can sustain an interest rate rise without going into recession.

Consider the following: The USA has a debt of 17 trillion dollars, or 40 - 50 trillion if you want to count in unfunded liabilities of pensions and Medicare. Defence expenditure is ruinously expensive. Shale fracking is a Red Queen's race with the Saudis, and the Saudis will win because the depletion rates on their wells are a fraction of the capital requirements of new shale wells.

So to me, it's all smoke and mirrors, which is why I'm buying gold.

[HerbalEd]

My over generalized Answer:

When a central bank increases its central rate the value of its currency goes up (and vice versa)

Since Fed Chair Janet Yellen is on record as saying Fed rates will increase this year (possibility at Sept Fed meeting or November) from the current 0% rate the FX trade is now reflecting this in the anticipated of the hike in September.

The reason why specifically EM's like Thailand suffer is that currency will normally flow away from most EM currencies and into the developed markets that is hiking their central bank rate - In this case it is the USD.

In short it is a simple supply and demand effect on the THB - There are more sellers than buying for THB and more buyers than sellers for the USD (within the USD/THB currency pair)

for more detail watch this video since it describes the effect on equities and Bonds as well as FX - On EM's

http://video.cnbc.com/gallery/?video=3000401850

I see this as a game of pea and thimble, or poker bluffing. Every time the Fed chair opens her mouth and hints at an interest rate rise " in the near future " , the US dollar as a reserve currency strengthens against most other currencies. I'll believe it when I see it happen. There is no evidence the American economy is so healthy it can sustain an interest rate rise without going into recession.

Consider the following: The USA has a debt of 17 trillion dollars, or 40 - 50 trillion if you want to count in unfunded liabilities of pensions and Medicare. Defence expenditure is ruinously expensive. Shale fracking is a Red Queen's race with the Saudis, and the Saudis will win because the depletion rates on their wells are a fraction of the capital requirements of new shale wells.

So to me, it's all smoke and mirrors, which is why I'm buying gold.

Is your rational to always buy gold when you don't know or trust what's going on (i.e., smoke & mirrors) with the international economy?

[carib102]

My over generalized Answer:

When a central bank increases its central rate the value of its currency goes up (and vice versa)

Since Fed Chair Janet Yellen is on record as saying Fed rates will increase this year (possibility at Sept Fed meeting or November) from the current 0% rate the FX trade is now reflecting this in the anticipated of the hike in September.

The reason why specifically EM's like Thailand suffer is that currency will normally flow away from most EM currencies and into the developed markets that is hiking their central bank rate - In this case it is the USD.

In short it is a simple supply and demand effect on the THB - There are more sellers than buying for THB and more buyers than sellers for the USD (within the USD/THB currency pair)

for more detail watch this video since it describes the effect on equities and Bonds as well as FX - On EM's

http://video.cnbc.com/gallery/?video=3000401850

I see this as a game of pea and thimble, or poker bluffing. Every time the Fed chair opens her mouth and hints at an interest rate rise " in the near future " , the US dollar as a reserve currency strengthens against most other currencies. I'll believe it when I see it happen. There is no evidence the American economy is so healthy it can sustain an interest rate rise without going into recession.

Consider the following: The USA has a debt of 17 trillion dollars, or 40 - 50 trillion if you want to count in unfunded liabilities of pensions and Medicare. Defence expenditure is ruinously expensive. Shale fracking is a Red Queen's race with the Saudis, and the Saudis will win because the depletion rates on their wells are a fraction of the capital requirements of new shale wells.

So to me, it's all smoke and mirrors, which is why I'm buying gold.

Is your rational to always buy gold when you don't know or trust what's going on (i.e., smoke & mirrors) with the international economy?

I think it's the "don't know" factor. I wonder how much gold bazza 40 was buying back in the summer and fall of 2011. He's seen the price of gold nearly cut in half since then so I guess at just under $1,100 an ounce it looks like a bargain. Won't he be excited to buy more when it test $1,000 and then later when it comes back down to normal levels around $700 an ounce. Of course maybe he's Russian as I believe the Russians are currently net buyers of gold.

[ldnguy]

Re. your "So if USD THB breaches 35.9 then its headed for USD THB at 41 the 10 year low of THB against USD."

Why do you consider 35.9 baht per USD the magic number here? Why not 35.4? And how do you know reaching that number necessarily means the baht is headed to 41?

Because he thinks that's what the charts say. He's basing it on previous high of 35.9 baht being breached. Previous highs and lows are known to traders and sometimes once these are breached the currency, share or whatever will move towards the next high or low. Only for people that believe in charts.

[carib102]

Note too that while everyone was off celebrating Asarnha Bucha Day and Buddist Lent yesterday and today the USD/THB moved from 34.90 through the resistance at 35 and is currently sitting at 35.23 heading into the weekend. While it's possible we'll get a pullback on Monday when Thais come back to work, the 35 level is now support for the pair and can effectively be considered the floor unless we get something fundamentally that would be a catalyst for a drop in the pair. Which is unlikely. What's more likely is that banks will sell the THB after missing the past two days and send the USD/THB even higher. But what do I know...

[carib102]

Re. your "So if USD THB breaches 35.9 then its headed for USD THB at 41 the 10 year low of THB against USD."

Why do you consider 35.9 baht per USD the magic number here? Why not 35.4? And how do you know reaching that number necessarily means the baht is headed to 41?

Because he thinks that's what the charts say. He's basing it on previous high of 35.9 baht being breached. Previous highs and lows are known to traders and sometimes once these are breached the currency, share or whatever will move towards the next high or low. Only for people that believe in charts.

The moves "based on charts" are actually based on human belief and speculation. What happens is that traders place buy stops above previous highs and sell stops below previous lows, so it's kind of like a self-fulfilling prophecy. Such moves have become far more pronounced since the advent of computerized or robot trading. Note that if you think you can take advantage of these types of moves they are often volatile and either continue strongly or reverse violently. There is much blood on Forex Ave. Good chart traders are good readers of human emotion typically as the charts simply tell them what's happening in the minds of those behind the trades. Poor chart traders slavishly follow "technical trading rules". There are no rules and certainly no absolutes when it comes to trading forex, or any asset for that matter. Hence the risk component of trading.

[Robert24]

$ will go stronger vs Thai baht. Main reason: divergent monetary policy. BoT likely to further cut interest rates, FED likely to start raising interest rates.

[carib102]

$ will go stronger vs Thai baht. Main reason: divergent monetary policy. BoT likely to further cut interest rates, FED likely to start raising interest rates.

Someone who gets it. And is not buying gold right now I would guess.

[chiang mai]

$ will go stronger vs Thai baht. Main reason: divergent monetary policy. BoT likely to further cut interest rates, FED likely to start raising interest rates.

....and then what happens, four, eight, twelve, twenty four months hence, that's the question really being asked?

[carib102]

$ will go stronger vs Thai baht. Main reason: divergent monetary policy. BoT likely to further cut interest rates, FED likely to start raising interest rates.

....and then what happens, four, eight, twelve, twenty four months hence, that's the question really being asked?

The same answer applies to all of the time frame referenced. The USD will continue to get stronger against the THB for the next 24 months at a minimum.If you trade forex and don't mind the huge spread and can hold on through pullbacks buy USD/THB. In fact, buy USD/Anything (except possibly GBP).

[Naam]

Re. your "So if USD THB breaches 35.9 then its headed for USD THB at 41 the 10 year low of THB against USD."

Why do you consider 35.9 baht per USD the magic number here? Why not 35.4? And how do you know reaching that number necessarily means the baht is headed to 41?

the voodoo priestess told him so

[stoli]

I see alot of this turmoil, or change, as being part of the equation of the markets trying to figure out if the US will raise interest rates by .25 or .50 basis points in September. Or, they could still decide not to do anything. Everyone is trying to guess what will happen. Once the Fed makes their decision, the baht against the dollar will stabilize, until the next Fed meeting. Then we start over again, up or down.

Also, of course, exports are down for Thailand. The stronger dollar should help to increase exports to the states, a very big market. Toyota has moved all car production out of Thailand to Vietnam. That really put a dent into the Thai export numbers. Now they import them.

[TDCNINJA]

Consider the following: The USA has a debt of 17 trillion dollars, or 40 - 50 trillion if you want to count in unfunded liabilities of pensions and Medicare.

Try 97 trillion in unfunded liabilities : Source: http://www.usdebtclock.org/

Edited July 31, 2015 by TDCNINJA

[bearpolar]

massive drop to 34.9 right now

[Naam]

I see alot of this turmoil, or change, as being part of the equation of the markets trying to figure out if the US will raise interest rates by .25 or .50 basis points in September. Or, they could still decide not to do anything. Everyone is trying to guess what will happen. Once the Fed makes their decision, the baht against the dollar will stabilize, until the next Fed meeting. Then we start over again, up or down.

Also, of course, exports are down for Thailand. The stronger dollar should help to increase exports to the states, a very big market. Toyota has moved all car production out of Thailand to Vietnam. That really put a dent into the Thai export numbers. Now they import them.

i hardly ever dare to make predictions because they pertain to the future but today i'll make an exception and claim "no such thing like a rate hike this september by the FED!"

[Naam]

massive drop to 34.9 right now

and that's mid rate. TT buying rate ~34.80

[8OA8]

Beware that this will all reverse, just as soon as all the Thai's with large cash reserves held overseas, do the loyal thing and return their funds to Thailand to help the Thai economy. I can envisage English Premier League football teams being sold, Distilleries in Scotland being sold, F1 racing teams being sold. Well thats what some would hope, but I think perhaps a little less vodka in the next glass of tonic is the cure to my vision

[Robert24]

$ will go stronger vs Thai baht. Main reason: divergent monetary policy. BoT likely to further cut interest rates, FED likely to start raising interest rates.

Someone who gets it. And is not buying gold right now I would guess.

correct. Long $, short EM currencies, short gold and metals.

[fvw53]

$ will go stronger vs Thai baht. Main reason: divergent monetary policy. BoT likely to further cut interest rates, FED likely to start raising interest rates.

....and then what happens, four, eight, twelve, twenty four months hence, that's the question really being asked?

If you have a correct reply to this question you will become as rich as George Soros

[NeverSure]

Currencies need to be looked at as commodities in the sense that they need a willing buyer and seller in an open marketplace*. I already listed a bunch of things that would affect the perception of value in the marketplace.

Someone doesn't trust any national currency so he buys a commodity - gold. Gold needs value perception more than the currencies because you can't eat it if you're hungry and you still need someone to perceive it as valuable because other than being heavy and pretty, it isn't valuable.

Interest rates affect the perception of value but so does a perception of inflation which could erode the value, perhaps above the amount of the interest rate. Looking only at what the baht or dollar are doing with interest rates is like walking through a maze blindfolded.

Again, there are so many things that affect perception such as political stability, and a bunch more I listed already above, Here.

I really don't know why I bother to write this stuff when there seem to be so many just itching to get burned.

Cheers.

*Yes, they are a medium of exchange but they have the same thing in common as commodities - an open marketplace of perception and demand. The market will determine the value.

[puukao]

Nobody knows where it's headed, or they would have know last year it was heading here and made millions..

nobody has a clue.

but the feeling the baht hits 40 before 30.....

which probably means lower gold and higher stocks.....probably...

and then in 20-years we will ask......"OK, where is the market headed?"

and again, nobody will know....

but you can still bet it all and get rich!!!!

[NeverSure]

It's possible that all of the potential increase in rates by the US Fed is already priced into the dollar. It's possible that an actual increase would do little.

What might (or might not) cause an increase in the value of the dollar against Asian currencies could be a weakening of the economies in Asia. I'm not predicting anything at all, just musing.

Cheers.