Thai baht may drop further this week

[alanrchase]

All this talk about the relative merits or otherwise of the US dollar, pound, euro, Mongolian groat, or whatever, should not distract away from the simple contention that the baht has been overvalued for a long time, and looks set for a steep fall due to a number of absolute facts.

According to The Economist Big Mac index, it is 36% undervalued against the US dollar (if you take that particular measure seriously).

It is as good a theoretical measure as any. In the long run, it will eventually reflect this value

So undervalued means it should be 25 to the dollar?

[Time Traveller]

All this talk about the relative merits or otherwise of the US dollar, pound, euro, Mongolian groat, or whatever, should not distract away from the simple contention that the baht has been overvalued for a long time, and looks set for a steep fall due to a number of absolute facts.

According to The Economist Big Mac index, it is 36% undervalued against the US dollar (if you take that particular measure seriously).

It is as good a theoretical measure as any. In the long run, it will eventually reflect this value

not necessarily. Since the export sector represents a larger portion - about 65% - of the GDP than the services sector, the government will do anything to keep the baht from appreciating to protect exporters.

Undervaluation/Overvaluation means nothing. What matters two things, the money flows and what the government's own manipulation policies are. Right now money is flowing out of thailand and exporters are under pressure.

[Thai at Heart]

All this talk about the relative merits or otherwise of the US dollar, pound, euro, Mongolian groat, or whatever, should not distract away from the simple contention that the baht has been overvalued for a long time, and looks set for a steep fall due to a number of absolute facts.

According to The Economist Big Mac index, it is 36% undervalued against the US dollar (if you take that particular measure seriously).

It is as good a theoretical measure as any. In the long run, it will eventually reflect this value

So undervalued means it should be 25 to the dollar?

That is what the long term trend will be in the long run. The USD is swimming under a mountain of debt. Lest we forget the days of 50 to the USD were on the back of the 97 crisis.

It got to about 28 a few years ago, but for now Thai gdp growth is stalled and politics has been a mess for 8 years now.

The USA cannot trade it's way out the amount of debt it has, long term it will continue to devalue.

[Thai at Heart]

All this talk about the relative merits or otherwise of the US dollar, pound, euro, Mongolian groat, or whatever, should not distract away from the simple contention that the baht has been overvalued for a long time, and looks set for a steep fall due to a number of absolute facts.

According to The Economist Big Mac index, it is 36% undervalued against the US dollar (if you take that particular measure seriously).

It is as good a theoretical measure as any. In the long run, it will eventually reflect this value

not necessarily. Since the export sector represents a larger portion - about 65% - of the GDP than the services sector, the government will do anything to keep the baht from appreciating to protect exporters.

Undervaluation/Overvaluation means nothing. What matters two things, the money flows and what the government's own manipulation policies are. Right now money is flowing out of thailand and exporters are under pressure.

I agree, but in the long run the USD is sitting on a gargantuan amount of debt. In the next few years I expect the baht to restrengthen to 30 and beyond.

50 to the USD was at time of baht crisis. 29 to the USD was at a time of usd crisis. But long run the baht will continue to strengthen. All these who say the baht was being strengthened by the BOT fail to grasp how much usd debt has been created in the last 8 years.

Mountains and mountains of it. The USA cannot pay this debt without devaluing the dollar in the long run. Right now markets are expecting usd rates to rise, so money will slosh out of Asian currencies into usd, but once that is stabilised, and Thai exports start to move again, the baht will have upward pressure on it again.

Edited August 4, 2015 by Thai at Heart

[alanrchase]

All this talk about the relative merits or otherwise of the US dollar, pound, euro, Mongolian groat, or whatever, should not distract away from the simple contention that the baht has been overvalued for a long time, and looks set for a steep fall due to a number of absolute facts.

According to The Economist Big Mac index, it is 36% undervalued against the US dollar (if you take that particular measure seriously).

It is as good a theoretical measure as any. In the long run, it will eventually reflect this value

So undervalued means it should be 25 to the dollar?

That is what the long term trend will be in the long run. The USD is swimming under a mountain of debt. Lest we forget the days of 50 to the USD were on the back of the 97 crisis.

It got to about 28 a few years ago, but for now Thai gdp growth is stalled and politics has been a mess for 8 years now.

The USA cannot trade it's way out the amount of debt it has, long term it will continue to devalue.

You make some sense to me. Unfortunately governments finance bears no link to household finance. Remember reading an article a couple of years ago about US reducing their dept. What they were saying was in 5 years time their debt would only be 24 trillion instead of 27 trillion. Can't run my life like that.

[sammygood]

makes my iherb addiction even more exensive

[yuv06]

Thai Baht Weakens Toward 2009 Low Before Central Bank Meeting http://www.bloomberg.com/news/articles/2015-08-05/thai-baht-weakens-toward-2009-low-before-central-bank-meeting?

[paymaster]

Now the submarines will cost more unless they don't pay it in USD

The Thai government once bought fighter jets from Sweden with chickens as currency so the falling baht is of little consquence. Will they buy subs with fish? Seems appropriate.

[yuv06]

Now the submarines will cost more unless they don't pay it in USD

The Thai government once bought fighter jets from Sweden with chickens as currency so the falling baht is of little consquence. Will they buy subs with fish? Seems appropriate.

It was actually paid by cash as at that time there was an avian flu out break as per news link http://www.reuters.com/article/2007/10/17/idUSBKK12227220071017

[yuv06]

Baht Tumble to Six-Year Low Ties Bank of Thailand Hands on Rates http://www.bloomberg.com/news/articles/2015-08-05/baht-tumble-to-six-year-low-ties-bank-of-thailand-hands-on-rates?

[AloisAmrein]

Making my U.S. Dollars look better and better.

What is the US $ against the Swiss Franc? Still lower then a Swiss Franc. A year ago even worse.

[lostoday]

Making my U.S. Dollars look better and better.

What is the US $ against the Swiss Franc? Still lower then a Swiss Franc. A year ago even worse.

What has this got to do with the topic? The Swiss Franc was controlled until a little while ago till the market finally beat the government into submission. So who cares?