Baht Appreciates To Strongest Level In 8 Years

[Old Man River]

the baht is and remains a banana currency.

investors have absolutely no reason at the moment to put money into thailand, as insecure the whole nominee and similar issues are.

but: the currency can easily be influenced/attacked. the central bank already jumped on the bandwaggon. by squeezing the central bank quite some money can be made.

the strengthening of the baht therefore has nothing to do with fundamental values. its pure speculation, furthermore related to the movements of the dollar towards other currencies.

One thing that is "different this time" is the Thai Bond market. It did not exist at the time of the '96 meltdown. Bonds tend to spread risk around and "usually" are held by strong hands, as opposed to the fast money emerging equity crowd that hits and runs from Thai markets every few years. If Bonds are appreciating things ARE more stable.

Good point Lannarebirth. Prior to 1997, there were no government bonds issued as it was against Thai law for the central government to issue bonds while running surpluses. Therefore, there was no benchmark to create a THB yield curve, other than via the USD/THB swap markets. Post deval, government bonds were issued, creating a benchmark for long term country risk which other THB bonds can be priced against. We will see the current government use the capital markets to finance the deficits from the past government.

Danone, you are confusing short term investors (hot money) with long term investors (Foreign Direct Investment - FDI). Hot money coming into the SET targets short term stability, not long term stability. Long term investors are currently taking a wait and see attitude on the nominee issue and other factors, given that they cannot take their investments out once they bring it in (factories etc.). Now, if we see hot money go out and stay out, then there is an immediate problem, but at present this is not the case.

[Old Man River]

Update:

Central bank urged to act more strictly to oversee baht

KRC conceded the implementation of the interest policy might neither help slow the foreign capital inflow nor ease the strengthening of the baht if foreign investors had confidence in the economic and political stability in Thailand.

--TNA 2006-11-15

One of the main reasons that fund managers have given for "invading" Thailand is that Thai shares are undervalued. While interest rates are a major financial tool for central banks in managing their currencies, as long as foreign fund managers see profits to be made and relative stability, they will take advantage of the opportunity. I don't think in this case that lowering the THB interest rate will help.

[Jai Dee]

Thai baht weaken to 36.52 – 36.54 baht per USD

A BankThai officer said the Thai baht value in the market this morning was around 36.50 to 36.52 baht per US dollar, weaker than that of yesterday valued at 36.40-36.41 baht per US dollar. He reasoned that many people were buying the US dollars in the market.

The officer stated that the Bank of Thailand (BOT) is taking care of the baht value in the market so it would not exceed 36.50 baht per US dollar. Moreover, the Yen currency rose sharply yesterday, but has remained stable today. The movement of Thai baht today is expected to be around 36.40 to 36.60 baht per US dollar.

However, many factors need to be noted. The central bank of the United States (FED) branch in New York will reveal their manufacturing survey results for November and the gasoline stock price of this week. Furthermore, the capital information of September and the manufacturing details of October will be announced tomorrow as well.

Source: Thai National News Bureau Public Relations Department - 15 November 2006

[Livinginexile]

Times are getting hard for US citizens getting the $$$ transferred across from the states....

I'm paying a mortgage in baht using transferred dollars! I'm trying to console myself with the thought that I will have a paid-for house when I retire and then I don't care if the exchange rate drops to 25 to 1--I'll still be in great shape. But it sure s*cks now!

I'm in the same boat as you, in january I put down 25% deposit on a condo at Nana. I got 30 baht to the Oz $ then and now its down to about 27. I will pay the balance in Feb when the condo is complete but allready I have to pay an extra 10%...ouch.

At least I got 25% at 30.

[dezeure]

"Pattaravadee Chinkulkitniwat, the money dealer of Kasikornbank Plc, said the baht had continued to strengthened in the same direction with the Japanese yen, which appreciated to 118 from 117.55 to the US dollar since the economy expanded more than expected."

This doesn't make sense. It the Yen went fro 117.55 to 118, it depreciated. At 118, you get more yen for your dollar. At 36.39, you get ""less baht, not more.

everyone says the Baht appreciates... Isn't it just that the dollar just depreciated cause I still get the same 46.8 baht for 1 euro but I get more dollars for my euros

[walter@kirz]

We all remember when the EURO = 50+ BAHT and right this minute it is EURO= 46.9

I got 44.85 yesterday with Western Union.

Anyway, as the rate US$/EUR is not changing that much the last weeks, the bath IS certainly stronger than 2 month ago.

[ray23]

Yes the dollar is weaker.

[Cpt_M0ney_Sh0t]

Always Emirates Bank, Take a nice vaction to Dubai, takes about 3-4 days no residency visa required. They have full online Banking and I withdrawed roughly $3,000 once on one pull from the ATM.. if they have a limit, I sure haven't found it yet. And funny how other currency's havn't moved against the dollar at all. Like the UAE Dirham, Kuwait Dinar, I would have to double check but I think most if not all Gulf countires are pegged to the dollar. Been like the same exchange rates here for the past 5 years of me going back and forth.

[ray23]

Have any American directed thier retirement into the New York Branch of Bank Of Bangkok and is so does it work well?

[PeaceBlondie]

Hardy, all my US govt. pensions including SSA are deposited directly into my WellsFargo account, and I've been withdrawing funds at a daily limit of $500 per day for several years now. They've just been bought up by Bank of America, I think. But when I phone and ask, they increase my limit to $1,000 per day. I use an address in the USA.

Are you withdrawing this through ATMs? I set up a Wells Fargo account so that my brother-in-law could draw funds to make my house payment and the monthly support we give my wife's relatives in the village. But they capped the withdrawal at $300 a day and it was a PITA. Instead they do monthly wire transfers for me for $15.

I suspect that, like a credit rating or dependent upon your rating, the bank has different limits for different customers. My limit was $300 per day when their service charge was $3, so I accepted a 1% charge. Then, about a year ago, they increased the charge to $5, so I phoned them and they increased my daily limit to $500. Same 1%. When I was travelling, and when I bought a used car and had optional surgery, I needed more money so they increased it to $1,000 per day as long as I wanted.

Call and ask at the toll free number. OTOH, if you can transfer more than $1,500 per month for only $15, you're ahead.

[Taggart]

Baht Appreciates To Strongest Level In 8 Years

Looking at the title of this thread, I guess it all depends what currency you compare it to. I know that ten years ago, I could only get about 18 baht to the Canadian $. Five years ago, I could get 28 baht. Today, I can get a smidgen less than 32 baht.

It's not that the Thai baht has got strong, it's that the U.S. $ has got weak.

[ilyushin]

Currently, I appreciate the stonger baht. I could go with 30/1 for a spell.

Comments on government corruption have very little to do with the FX or the Thai baht. All the admimistrations ( governments) of every country are crooks with some more than others. Politics is the biggest industry and strongest institution in the world today so big money changes hands.

[ray23]

Ok guy I have a big question I would say what the problem ha been very well covered. So you live in Thailand and you ain't going back. Your retirement is paid in dollars and you can't change that.

Do leave your extra money in the states and wait for the dollar to get better? (My current stradegy)

Or do you move it now, expecting the dollar to continue tanking, for a long term?

[britmaveric]

Or do you move it now, expecting the dollar to continue tanking, for a long term?

Leave it - $ will increase.

[Indifferent]

Hmm... The writing's on the wall.

I posted this on another thread but is perhaps more relevent here:

FRSB 97 Newsletter

And on the 7th of November the BOT restricted foreign access to the Thai baht...exactly as they did in 97 for thr same reasons.

Revision of Measures to Prevent Thai Baht Speculation

Dejavu or what?

The comment that exports will not be affected is pure bovine effluent. Thailand exports rely on their competitiveness with China (which actually has a better reputation for quality) and most other Asian currencies (including Yaun) has actually depreciated. In general the USD has been getting stronger.

Bloomberg 13 Nov 2006

As another poster pointed out. It also affects foreign invesment in real estate since now it is more expensive to buy property with forign currency and (lets face it) Thai property isn't exactly the most attractive way to invest money for profit anyway. This was the straw that broke the camels back last time.

It looks like the lessons learned from before are not being heeded.

There is still time to make the right decisions otherwise I think 2007 will be another year with a 7 that Thailand is remembered for.

[bkkandrew]

Hmm... The writing's on the wall.

I posted this on another thread but is perhaps more relevent here:

FRSB 97 Newsletter

And on the 7th of November the BOT restricted foreign access to the Thai baht...exactly as they did in 97 for thr same reasons.

Revision of Measures to Prevent Thai Baht Speculation

Dejavu or what?

The comment that exports will not be affected is pure bovine effluent. Thailand exports rely on their competitiveness with China (which actually has a better reputation for quality) and most other Asian currencies (including Yaun) has actually depreciated. In general the USD has been getting stronger.

Bloomberg 13 Nov 2006

As another poster pointed out. It also affects foreign invesment in real estate since now it is more expensive to buy property with forign currency and (lets face it) Thai property isn't exactly the most attractive way to invest money for profit anyway. This was the straw that broke the camels back last time.

It looks like the lessons learned from before are not being heeded.

There is still time to make the right decisions otherwise I think 2007 will be another year with a 7 that Thailand is remembered for.

You are not wrong. I have been saying this for a while. If you also look at the number of real estate projects scheduled for completion (i.e. contributing to supply) in 2007, the drop-off in demand from new visa rules, they really could have the making of a perfect storm.

Oct 2007. GBP 1 = B100..

As for USD, there will only be a making up for lost ground. Depends where the USD bottoms against the Yen/EURO/GBP

Edited November 16, 2006 by bkkandrew

[Old Man River]

Hmm... The writing's on the wall.

I posted this on another thread but is perhaps more relevent here:

FRSB 97 Newsletter

And on the 7th of November the BOT restricted foreign access to the Thai baht...exactly as they did in 97 for thr same reasons.

Revision of Measures to Prevent Thai Baht Speculation

Dejavu or what?

The comment that exports will not be affected is pure bovine effluent. Thailand exports rely on their competitiveness with China (which actually has a better reputation for quality) and most other Asian currencies (including Yaun) has actually depreciated. In general the USD has been getting stronger.

Bloomberg 13 Nov 2006

As another poster pointed out. It also affects foreign invesment in real estate since now it is more expensive to buy property with forign currency and (lets face it) Thai property isn't exactly the most attractive way to invest money for profit anyway. This was the straw that broke the camels back last time.

It looks like the lessons learned from before are not being heeded.

There is still time to make the right decisions otherwise I think 2007 will be another year with a 7 that Thailand is remembered for.

What would you suggest they do differently?

[jing jing]

Or do you move it now, expecting the dollar to continue tanking, for a long term?

Leave it - $ will increase.

britmaveric, I notice you've always been bullish on the USD... ever since it was 40THB, 39, 38, 37, and still now at 36.5. Don't get me wrong, I certainly hope you're correct, but I'm just wondering -- is there any particular knowledge or information you're basing this prognostication on or is it just wishful thinking?

We know that currency values are cyclical and tend to fluctuate just as do the values of gold, real estate, and stocks... sometimes that cycle can be rather protracted, as we saw gold stagnate around $250 for the better part of ten years, and real estate values were down from 1990-95.

I'm sure eventually the dollar will recover, but as my investments are dollar denominated I'd hate to see it sucking ass for the next ten years while I try to raise a family here in Thailand.

[Jai Dee]

10 manufacture and export associations urges government to solve continually strengthening of baht currency

10 associations related to manufacture and export has called for the government to urgently solve the continuous appreciation of Thai baht. They said if the government is still passive, they would reduce the production output as well as the number of personnel.

This morning at the Grand Hyatt Erawan Hotel, the 10 associations made a statement on their impacts from the uninterrupted strengthening of the Thai currency. Thai Frozen Foods Association Chairman Poj Aramwattananond said they have been affected from this appreciation since the beginning of this year, and the export associations have lost 12 percent of profit as a consequence when being compared to other associations in neighboring ASEAN countries.

Mr. Poj has demanded the government sector, especially the Bank of Thailand, to urgently solve the exchange rate problem which currently stands at 36.65 baht per US dollar and if the problem still lingers, each association may have to reduce the power of production or personnel.

He said that the initial damage of the associations following the appreciation could not be measured, but the associations will submit a document to Prime Minister Surayud Chulanont today afternoon, asking him to solve the problem urgently.

Mr. Poj also said the government should reduce the expenses, if the baht currency continues to strengthen. The objective is to help the export sector. He also insisted that the 10 associations' demand is not supposed to pressure the government but to propose the issue that has affected several parties.

Source: Thai National News Bureau Public Relations Department - 16 November 2006

[Old Man River]

10 manufacture and export associations urges government to solve continually strengthening of baht currency

Mr. Poj has demanded the government sector, especially the Bank of Thailand, to urgently solve the exchange rate problem which currently stands at 36.65 baht per US dollar and if the problem still lingers, each association may have to reduce the power of production or personnel.

He said that the initial damage of the associations following the appreciation could not be measured, but the associations will submit a document to Prime Minister Surayud Chulanont today afternoon, asking him to solve the problem urgently.

Source: Thai National News Bureau Public Relations Department - 16 November 2006

I always find it humorous when people think a central bank can, voila, fix currency movements. The THB is based on a managed float, with the word "float" being the operative word. Dr. Tarisa has already said that there is only so much a central bank can do, and if this is a situation that continues, the exporters should look at themselves and make their operations more efficient.

[xbusman]

Exporters are looking at operations and the currency will right itself or the economy will collapse. It is an economy that is based heavily on exports. Even at 42 the Thais have a very difficult time competing with either the low cost of China or the high tech of Taiwan. At 36 there will be blood everywhere.

This year at Canton Fair in Guangzhou, there were a huge number of Thais attending, usually I trip across one or two, this year they were over in force making deals to have their products made in China. Over the past three years I have had probably 25% of my suppliers close their doors and start servicing their sales from production on mainland or Vietnam, they are getting killed in garments, electronics, and a broad list that goes on and on. Eventually that will slow the economy enough to reverse the trend. Its all cycles. Problem is, that it is easy to maintain but hard to get back. If they let it get too far out of control the snap back can be dreadful.

[Indifferent]

What would you suggest they do differently?

Well that depends on many factors. Lowering of interest rates (which is already on the table) is a positive move forward, but may not be enough. Another is to allow the Baht to depreciate (a whole new set of problems but will help exports). But many of the options will be dictated by what happened to the capital gleened in the preceeding years as to whether it is a "ridable low" or a catastrophe.

The following extract is taken from

Thailand:

The ups and downs of an "emerging market" and their basis in a worldwide over-accumulation

The crash of 1997 revealed that this growth was founded on credit, on an anticipation of future wealth. But that is certainly not due to any special quality of Thailand, even if all the pundits charge that its growth has been financed with "paper."

and goes on to say.....

Accumulation of capital (and a primitive one at that!) only works by massive use of credit. But it does not work with the conditions under which the inflow of money to Thailand had come about. There was hardly any capital which could have used credit for its own need to expand. Sufficient opportunities for productively using all the money invested in the boom years did not exist. Most of the money was invested into real-estate projects and used for stock-market speculation. The productive transactions were insufficient to lay a foundation for a national economy, which would have brought about the necessary international demand for the local currency.

And so we are back to real estate, and my guess is this was the source to finance all those dodgy land deals in the few past years that we've been hearing about.

Exporters are looking at operations and the currency will right itself or the economy will collapse. It is an economy that is based heavily on exports. Even at 42 the Thais have a very difficult time competing with either the low cost of China or the high tech of Taiwan. At 36 there will be blood everywhere.

This year at Canton Fair in Guangzhou, there were a huge number of Thais attending, usually I trip across one or two, this year they were over in force making deals to have their products made in China. Over the past three years I have had probably 25% of my suppliers close their doors and start servicing their sales from production on mainland or Vietnam, they are getting killed in garments, electronics, and a broad list that goes on and on. Eventually that will slow the economy enough to reverse the trend. Its all cycles. Problem is, that it is easy to maintain but hard to get back. If they let it get too far out of control the snap back can be dreadful.

Agreed. We have already seen foreign investment interest shift to other Asian countries (especially Vietnam) . Which are both more foreign friendly and more competitive. And recent changes (visa regs, halt to foreign expansion as well as the uncertain political map) have all played a part.

I would also add that once the undefinable point of no return has been reached (my feeling is it is not all lost....yet), it is a very rapid, slippery slope downhill and as xbusman says, "the snap back can be dreadful"

But on a lighter note...Whatever happens, Nan plaza and Patpong will still be here

Edited November 16, 2006 by Indifferent

[Indifferent]

Partial quote:

........they would reduce the production output as well as the number of personnel.

And so the final nail in the coffin would be hammered home as the real estate market deteriorates.

Reduction in personel=higher office vacancies (more than 20% in BKK in 97....currently at about 13%)

Reduction in personel=more rental vacancies.

Reduction in personel=more properties for sale.

Extract from "The fifth Migration"

http://www.narei.com/fifthmigration.htm

As the number of net professional jobs grew in a city, vacancy rates dropped and real estate prices appreciated. As net professional jobs were lost vacancy rates increased and real estate prices were stagnant or dropped.

Edited November 16, 2006 by Indifferent

[ray23]

Ok getting back to the longer suffering dollar and how long it will last. The states has in my lifetime alway been through boom times followed by recessions. Would that history give an indication of how long the dollar will be in trouble?

Assuming of course that the current congress stops uncle george from signing blank checks.

It seems odd to me that he dollar has dropped so much and they fed only seems to be worried about inflation, any one got a clue on either one of thes things.

All the elements of 97 do seem to be present. Real estate is crazy even sleepy little Udon, I priced out a ria of land being sold in lots, the actual cost of a Rai, $73,000, not even a half acre That is insane this isn't Beverly Hills no where close it. Today in Fresno California a comparable California area, a farming hub just like Udon, I would venture to say I could buy land there for less there then here. What really amazes me is Thai's are buying it, on credit of course.

Of course the newbies who come into town and don't really think Rai and Baht yet are also buying it. Why people domn't do realistic price comparion I have no idea, they would do it at home. OL I'm off my soap box sorry guys.

By the way you can still buy a ria of land around here from anywhere between to 170k to 300K baht, if you are patient and put a little efffort into it, within 15 KLMS of town

[Heng]

Nothing wrong with shaking out inefficient exporters once in awhile. Almost 9 full years of inflated profits from USD-THB forex... if you haven't been diversifying and reinvesting in that stretch, you deserve to take a hit IMO.

[xbusman]

Margins in Thailand have been razor thin for over ten years now thanks to China and that was at 42/$. Exactly what will Triumph motorcycles do with the price of their 100% exported motorcycles climbing almost 15% due to currency alone? Diversify into 200cc mopeds? Buy big box retailers, oh wait, they are being stopped, perhaps they should nail the doors shut and build high rises.....

Manufacturing exports add pure value to the economy unlike the soft money created by service industries such as retailing, landlords, massage parlors. To take raw materials and create finished goods that can be sold at a profit creates wealth and is the source of economic progress. No society can get wealthy massaging each other or doing each others hair.

Look at the countries that made the transition from third world to first world over the past fifty years. They all did it from a strong manufacturing basis and exports. You could even include Germany in that group, after the complete and total destruction of their country they did not rebuild it into a first class world power with hair parlors and noodle carts, they did it with cars and machine tools.

This baht/dollar problem could get serious quickly, not because the dollar is weak but because the remimbe is weak. If China did not have a peg, Thailand would remain competitive in the general scheme of things despite the high labor rate and lousy infrastructure. The bigger picture is that China is vacuuming up the business that may never come back to Thailand. It would be the final step in making Thailand a vassel subject in the Chinese sphere and I think that would be a shame.

Lots wrong with losing manufacturers and in particular exporters.

[cclub75]

Nothing wrong with shaking out inefficient exporters once in awhile. Almost 9 full years of inflated profits from USD-THB forex... if you haven't been diversifying and reinvesting in that stretch, you deserve to take a hit IMO.

Correct Heng. It was sabai for them.

But... the problem is that the "thai machine" is led by exports.

If this machine fails, then the whole country will catch a cold.

[Indifferent]

Apart from manufacturing (China and Vietnam being the main competitors), the strong appreciation also afects the software industries (India being the main competitor).

Over the past few years, a lot of business in software engineering has been funneled into Thailand mainly due the Thailands investment in it's own technology infrastructure and (in terms of manpower cost) has been comparable to India. The net result has been the rise of the software parks to take on the foreign contracts.

Unlike manufacturing, software does not require large material investments (factories, heavy machinery etc), it is mainly a manpower intensive industry.

The continued appreciation of the Baht makes Thailand labour uncompetitive and (as very little material investment is required) it is easy to switch operations at the drop of a hat.

If things do not improve, think it will not be long before the software industry raises it's concerns as contracts are completed and eventually dry up.

[chownah]

Over the past few years, a lot of business in software engineering has been funneled into Thailand mainly due the Thailands investment in it's own technology infrastructure

Indifferent,

Can you give examples of Thailand investing in its own technology infrastructure in this regard?

Chownah

[ovenman]

Over the past few years, a lot of business in software engineering has been funneled into Thailand mainly due the Thailands investment in it's own technology infrastructure

Indifferent,

Can you give examples of Thailand investing in its own technology infrastructure in this regard?

Chownah

I'd also be intrigued to hear specifically how Thailand has been investing in its own technology infrastructure (in terms of manpower cost) comparable to India.