Baht Likely To Strengthen To 35 To Dollar

[dclaryjr]

Well I just decided against the purchase of a house here so I won't be transfering a big amount of $ for now.

Amen! I very reluctantly agreed build a house back when the the rate was 42 or 43. Obviously my monthly payment has jumped quite a bit. My only consolation is that it will be paid for in 10 years and I'll still be able to live pretty well even if the rate drops into the 20s.

[mitrapaap]

When the growing problems in the US economy start to bite, the pound and euro will be affected, as the European economies have some major links to the US economy.

In the longer term, it is the coming rise in the price of food that causes the biggest worry for all nations that are importers, and/or where what they grow depends on inorganic fertilised, which is getting very expensive. Thailand is not so much hit by that. Traditionally, it has exported a lot of food and imported very, very little.

What we are seeing now, reflected in the US dollar, is the waning of industrialism. Every country will be hurt, but some less than others. Proportionately, Thailand is less highly-industrialised than the West, so it looks as if it may not suffer as badly as many.

Put crudely, an individual family's economy is a matter of what food and shelter and extras they can afford from their income, after deducting the expenses of earning the income. The 'nasties' for many families in the West are, first , the rise in the heating costs for the 'shelter' and, secondly the rise in the costs of travel to work (particularly from suburbs). When food prices go up, too, there will be little available for 'extras'---and that will hit GDPs.

Those of us who are living in Thailand should thank our lucky stars!

Not quite so I'm afraid. The US does not need to import or export hence it is a self sustaining economy in that respect. Thailand on the other hand is a net exporter and relies on exports for much of its GDP. So in the worst case scenario the US could batten down the hatches and still be okay whilst Thailand and many other Asian countries would find their exports too expensive for the US market. I ask you, what would Thailand do if they could not export simply because the dollar/baht rate was say 15 or baht to the dollar (for example). The answer is seriously bad news for the Thai economy and its people. Take that logic one step further and consider the impact on China's huge dollar debt. China, given that scenario has the potential to become the worlds largest debtor. In summary, the impact of a waning dollar is bad news for everyone, not just the West.

The US is a self sustaining economy. Who told you that, Bush?

[dog412]

far from being"lazy",i believe most statistics find the American workforce to be one of the most, if not the most, productive in the world. it is a big country, and for the most part your investments are safe. as a add on, the U.S. can be very good value, depending on the location. thanks, but i'll keep my assets in the states.

[backflip]

"The US does not need to import or export hence it is a self sustaining economy"

The US has a monthly trade deficit of $60 billion. The US imports a third of the oil it requires. The US economy is many things. "Self sustaining" it is not.

"Take that logic one step further and consider the impact on China's huge dollar debt. China, given that scenario has the potential to become the worlds largest debtor."

There's no "logic" to your example. Thank God I didn't study economics under you. China doesn't have a "huge dollar debt". It has a huge dollar surplus. You simply don't understand the difference between trade "deficit" and "surplus", so your scenario is absolute bunk.

[Mid]

US equals proof that a consumption economy ,

is not self sustaining

edit for spelling as usual .........

Edited December 6, 2006 by Mid

[Heng]

Earn in Baht and USD and you'll feel much less passionate about how various countries "should" run their economies.

[AlexLah]

far from being"lazy",i believe most statistics find the American workforce to be one of the most, if not the most, productive in the world. it is a big country, and for the most part your investments are safe. as a add on, the U.S. can be very good value, depending on the location. thanks, but i'll keep my assets in the states.

Bermuda has the highest GDP PPP in the world at $69,900 (2004 est.) according to the CIA's The World Factbook.[1]

[chiang mai]

When the growing problems in the US economy start to bite, the pound and euro will be affected, as the European economies have some major links to the US economy.

In the longer term, it is the coming rise in the price of food that causes the biggest worry for all nations that are importers, and/or where what they grow depends on inorganic fertilised, which is getting very expensive. Thailand is not so much hit by that. Traditionally, it has exported a lot of food and imported very, very little.

What we are seeing now, reflected in the US dollar, is the waning of industrialism. Every country will be hurt, but some less than others. Proportionately, Thailand is less highly-industrialised than the West, so it looks as if it may not suffer as badly as many.

Put crudely, an individual family's economy is a matter of what food and shelter and extras they can afford from their income, after deducting the expenses of earning the income. The 'nasties' for many families in the West are, first , the rise in the heating costs for the 'shelter' and, secondly the rise in the costs of travel to work (particularly from suburbs). When food prices go up, too, there will be little available for 'extras'---and that will hit GDPs.

Those of us who are living in Thailand should thank our lucky stars!

Not quite so I'm afraid. The US does not need to import or export hence it is a self sustaining economy in that respect. Thailand on the other hand is a net exporter and relies on exports for much of its GDP. So in the worst case scenario the US could batten down the hatches and still be okay whilst Thailand and many other Asian countries would find their exports too expensive for the US market. I ask you, what would Thailand do if they could not export simply because the dollar/baht rate was say 15 or baht to the dollar (for example). The answer is seriously bad news for the Thai economy and its people. Take that logic one step further and consider the impact on China's huge dollar debt. China, given that scenario has the potential to become the worlds largest debtor. In summary, the impact of a waning dollar is bad news for everyone, not just the West.

The US is a self sustaining economy. Who told you that, Bush?

Er, Backflip did, two posts down, I did two posts earlier, Reuters newswire did yesterday and so on...

[gmac]

So much talk about the US. Who, what or where is the US - if anybody cares that is!!

[dog412]

far from being"lazy",i believe most statistics find the American workforce to be one of the most, if not the most, productive in the world. it is a big country, and for the most part your investments are safe. as a add on, the U.S. can be very good value, depending on the location. thanks, but i'll keep my assets in the states.

Bermuda has the highest GDP PPP in the world at $69,900 (2004 est.) according to the CIA's The World Factbook.[1]

and what exactly does that have to do with worker productivity? bermuda produces what?

[dog412]

So much talk about the US. Who, what or where is the US - if anybody cares that is!!

obviously someone does, as this thread is about how the U.S. currency could influence people half a world away. i doubt many in the world worry about the baht, in comparison. last i heard, California itself was the fourth largest economy in the world. jealous?

[The Philosopher]

If the value of the Baht attracts such worry then reasons for being here and the reasoning behind every comment needs personal reflection............. if you are surviving or hope to survive on the pensions or savings dependent on the value of the Thai currency then re evaluate your position.

You will die of worry in a situation where you sought to be worry free........... Is it worth it?

[dog412]

If the value of the Baht attracts such worry then reasons for being here and the reasoning behind every comment needs personal reflection............. if you are surviving or hope to survive on the pensions or savings dependent on the value of the Thai currency then re evaluate your position.

You will die of worry in a situation where you sought to be worry free........... Is it worth it?

i have to agree with you. while i have the utmost sympathy for anyone affected by currency fluctuation, visa and business regulations change, the truth is preparedness is not the easiest business. added to this the "fickleness" of the Thai system and adds up to something quite beyond the norm. best of luck to all.

[liberty9133]

The United States is the not only the world's largest economy, it is that large that the whole world economy is dependent upon its performance. That is to say, the interdependence of major and most minor economies upon the consumption of goods by Americans drives the economy of the world. This is why central banks around the world are holding almost worthless dollars in their treasuries. If they stopped accepting dollars, imagine what that would do to their economies: absolute financial disaster in some cases. If someone decided to not take dollars or, even worse, sell dollars from these treasuries, the world would be thrown into the worst economic disaster in all of time.

I am not certain who came up with the idea, but it is obvious that all the major players have signed onto this folly. The Europeans, China, Japan, India lead the way. There are some inherent dangers on the horizon: Namely, the radical Islamic movement, who wants to topple the economies of the west. What they do not care about is how that will affect the rest of the world. China's debt portfolio is also troublesome if not downright scary.

The world has become an interdependent economic entity. There is really no country that is truly independent or insular. Some could out last some economic downturns for a few years. But the internal politcal pressures would dictate that most would have to turn to outside economies in short order.

Judging by what I read in various journals and newsletters regarding gold and currency prices, we should continue to expect a, hopefully gentle, downward adjustment of the dollar. Some have predicted a rather steep dollar decline. I, for one, do not believe that that steeper scenario. I would, therefore, expect that the Baht will continue to improve against the dollar for sometime to come.

As others have posted, how the TB fares against other currencies is anyone's guess. However, it is important to note the European economies will be negatively affected by both Chinese imports and the dollar decline.

One can also conclude that the tidal force of Asian economies will continue to show remarkable improvement. The only caveat is the aforementioned Chinese debt problem.

One may as well take the best possible attitude:Sit back and enjoy the ride..we're all on it anyway.

[Virgil]

What are we talking about - it's already 34 - 35 to $US today. Great prediction.

Looks like the so called Economic Think Tank needs to polish their crystal ball, it sure isn't serving them very well, is it?

The article is a classic case of DOA, i.e., dead on arrival.

Oh but you miss the point. You see, Thai people are being told the Baht is strengthening. Thaksin is out ... Muslim fundamentalist dictator has successfully executed a coup. Change in government ... change in Baht. Change in Baht is good .... therefore, the new government will claim that the change in government is good too!!!!

Politics and propoganda ....

Virgil, Out!

[chiang mai]

"The US does not need to import or export hence it is a self sustaining economy"

The US has a monthly trade deficit of $60 billion. The US imports a third of the oil it requires. The US economy is many things. "Self sustaining" it is not.

"Take that logic one step further and consider the impact on China's huge dollar debt. China, given that scenario has the potential to become the worlds largest debtor."

There's no "logic" to your example. Thank God I didn't study economics under you. China doesn't have a "huge dollar debt". It has a huge dollar surplus. You simply don't understand the difference between trade "deficit" and "surplus", so your scenario is absolute bunk.

Let’s take each of these in turn and let’s deal with China as a debtor first and leave the derogatory comments aside if we may!:

I stated, "Take that logic one step further and consider the impact on China's huge dollar debt. China, given that scenario has the potential to become the worlds largest debtor."

And you very kindly replied, “There's no "logic" to your example. Thank God I didn't study economics under you. China doesn't have a "huge dollar debt". It has a huge dollar surplus. You simply don't understand the difference between trade "deficit" and "surplus", so your scenario is absolute bunk”.

As America has accumulated debt it has sold it off in the form of Treasury bonds, mostly to Asian countries. I believe as of a few months ago India surpassed China as being the largest holder of these bonds and the largest single holder of US funds outside the US. The problem is therefore not unique to China but to all of the Asian countries holding the trillions of dollars of US debt. The Washington Post quotes:

“The Chinese are sitting with $750 billion in low yielding fixed income securities and rates have been falling. At the same time the dollar has been sliding. The pressure on the dollar started in early September after statements by Fangang, a member of the central bank’s policy committee. He said in October, “China risks an erosion of its holdings because the dollar will probably decline.” In late August he had said, The US dollar is no longer a stable anchor in the global financial system, nor is it likely to become one, therefore it is time to look for alternatives.”

The implications of the foregoing are that US government bonds have the potential to achieve “junk” status with no yield and no potential buyers. In that event China would cease to maintain a budget surplus and in order to maintain the status quo and to finance growth would need to borrow heavily, perhaps more so than any country in history.

As for the second issue regarding the US being a self sustaining economy:

I said, "The US does not need to import or export hence it is a self sustaining economy"

And you replied, “The US has a monthly trade deficit of $60 billion. The US imports a third of the oil it requires. The US economy is many things. "Self-sustaining" it is not”.

The issue of trade imbalance is directly linked to the debtor issue. The difference between the US and China however is that China NEEDS to export whilst the US CHOOSES to import. The FT quotes:

“The Bush administration grants Beijing free and unfettered access to US consumer markets, in return for massive Chinese purchases of US bonds”.

America is living at a level that it cannot afford and the trade deficit or unmanaged consumerism is a prime example of this. America does import 60% of its oil, (not 33%) and again I quote, this time from a recent article in The Economist:

When asked what the top 'energy issue' in the country was, 25 percent said 'environmental policies and public attitudes that block new energy projects in the U.S.'; 23 percent said 'lack of energy conservation'; and 20 percent blamed 'restrictive government policies that limit development of new energy.' New energy means new 'conventional oil and gas exploration and development.’

Thirteen percent of respondents said the country should increase consumption of 'coal, nuclear and other energy,' and another 10 percent said the main focus should be on increasing 'domestic oil and gas supplies.'

'Clearly the right track is providing more environmentally safe, not risk free, but environmentally safe access to drilling rights' in U.S. waters and on U.S. land, like the Arctic National Wildlife Refuge in Alaska, said Woodward.

I believe that what is being said here is that America CHOOSES, not NEEDS to import oil and the same goes for anything else brought into the USA. In that respect America is a self-sustaining economy.

Finally, if we contrast the potential fall out of the current US Dollar predicament the pain will be felt in many countries. But countries such as Thailand who NEED to export will feel a greater degree of pain than others who choose to do so.

I don’t object that you disagree with my views since it is a popular and easy surface view of many Americans (which incidentally I am not). But you should be aware that it is a view that is shared by many in the international finance community. You may want to gain further insight into all of this by reading more on the subject and I recommend the following link as a starter.

http://etf.seekingalpha.com/article/21655

[farang2002]

What are we talking about - it's already 34 - 35 to $US today. Great prediction.

Looks like the so called Economic Think Tank needs to polish their crystal ball, it sure isn't serving them very well, is it?

The article is a classic case of DOA, i.e., dead on arrival.

Maybe they should call it the 'Stink Tank', since most of their grey matter has soured and rotted.

[Indifferent]

Well..Lets put this into perspective.

Japan is the biggest importer of Thailands goods And good old great britain is the biggest investor (yes I can give you links...but why should I since you are too lazy to google).

Currently..the Yen is doing very well against the dollar and so is the pound. so untill further evidence that the dollar is making an impact (apart from cheaper petroleum) then Thailand is doing OK.

The big impact will be if/when japan actually raises it's interest rates above 0%.

[Martin]

'The Philosopher' said, in post #42,

"If the value of the Baht attracts such worry then reasons for being here and the reasoning behind every comment needs personal reflection............. if you are surviving or hope to survive on the pensions or savings dependent on the value of the Thai currency then re evaluate your position.

You will die of worry in a situation where you sought to be worry free........... Is it worth it?"

I doubt whether it is ever possible to achieve a "worry free" life, but "less worrying" is certainly worth chasing.

For the past decades, anybody with a modest dollar, or sterling, pension income has been able to live far better here than they would have lived in the West.

Even with the baht strengthening now, and in the future, my reasoning leads me to foresee that that can continue to be true. Note that I wrote'can', and did not write 'will'.

It can, provided the Western pensioner makes an appropriate 'investment' here that will bring in the necessary 'income' in future years.

With the baht strengthening, just living by spending the pension income each month is not sustainable. What the pensioner can purchase each month will notch down with each strengthening of the baht, and with each piece of inflation.

His Majesty appears to have given this a lot of thought a decade ago (although, obviously, concentrating on the well-being of the poorer majority of his subjects) and concluded that each family and community getting partial sufficiency would be better for them than being dependant entirely on 'the market'. For them, their 'market' was the labour market. For us Western pensioners, our 'market' is the foreign-exchange market.

As others have pointed out earlier in the thread, "when the American economy sneezes, the rest of the world catches the cold".

Economically, life is going to get harder for all of us, but IMO it would be more worrisome to be preparing for that if I were living elsewhere than here in Thailand.

[ray23]

If the value of the Baht attracts such worry then reasons for being here and the reasoning behind every comment needs personal reflection............. if you are surviving or hope to survive on the pensions or savings dependent on the value of the Thai currency then re evaluate your position.

You will die of worry in a situation where you sought to be worry free........... Is it worth it?

Yes, I think it is time for reality check here. This is the first time I have ever had the time to follow something like this, I view it as a learning experience. Now why is that ? Well I was working seven days a week twelve hours day trying to get that dollar, no matter what the rest of the world thought of it.

Isn't interesting that I now have time and enough money?

Americans lazy I would have to disagree with that, most Americans are workaholics. Less leisure time then majority of the world. There are of course exceptions, the average American didn't send the production plants out of country. The big bucks did and not because of production because they could get the work completed at a cost that no American could live on. So even if production levels were less it didnt matter, profits were still higher.

So as to perceptions of Americans some are not that accurate and little to learn there. But how economies really work that is very interesting.

[Martin]

"good old great britain is the biggest investor".

I don't think that much that is invested here by the City of London has been deposited in the British banks by the old and great British.

It will mostly be Middle East money (derived from oil) and Chinese money (derived from selling consumer goods to the US), methinks.

The Thailand Government would do well to put a tax on capital inflow and outflow and reduce the baht's vulnerability to excessive movements.

Likewise, a 'Tobin Tax' on all currency and derivative swops would have reduced the excessive bubble pressure that the whole world is now going to have to cope with.

This strengthening of the baht is just one symptom of the problem that we have been building up ever since we were led to ignore the message of the early seventies (rise of OPEC, America's oil production starting its decline and so on). Reagan and Thatcher have a lot to answer for.

[PeaceBlondie]

Again I ask: what percentage of Thai baht transactions are just short term investments by speculators such as mammoth hedge funds? 90%? And these speculators aren't looking at the fundamentals?

The worry factor for me (living on US pensions) is that I have lost over 12% of my income in one year. So, I'll tighten the belt (I need to lose weight anyway!). The directors of BOT are not worrying about farang pensioners.

The worry factor for Thailand is that many exports are denominated in dollars. Right?

[Indifferent]

"good old great britain is the biggest investor".

I don't think that much that is invested here by the City of London has been deposited in the British banks by the old and great British.

It will mostly be Middle East money (derived from oil) and Chinese money (derived from selling consumer goods to the US), methinks.

The Thailand Government would do well to put a tax on capital inflow and outflow and reduce the baht's vulnerability to excessive movements.

Likewise, a 'Tobin Tax' on all currency and derivative swops would have reduced the excessive bubble pressure that the whole world is now going to have to cope with.

This strengthening of the baht is just one symptom of the problem that we have been building up ever since we were led to ignore the message of the early seventies (rise of OPEC, America's oil production starting its decline and so on). Reagan and Thatcher have a lot to answer for.

There's always one...isn't there. I said I couldn't be bothered to google it..but here you go anyway

Direct Investment

I can also give you pretty graphs etc if thats not enough. But please. If you have any other info to the contrary then please give me a link/pdf etc.

In the good old rules of science, it only takes 1 example to disprove......so give it to me!

You will also note that I said investment. Not imports/exports (i.e buying and selling) which, as I said, Japan is the major importer form LOS. And yes I CAN give you proof I never post anything without personal experience or research. Something you should bear in mind.

Oh. and by the way, tax on inflow is also (indirectly) called "interest rates" which Thailand has chosen to reduce (another option to control the baht) but is still an option to increase!

And what bubble???? A few years ago the baht was a lot less than it is now with worse deficit and it did OK until the speculators seized their opportunity. Now they have much more control over the baht than before and they've been doing pretty good so far.

Look before you leap.

Like most people...lots of naresaying...very little proof.

[Indifferent]

Again I ask: what percentage of Thai baht transactions are just short term investments by speculators such as mammoth hedge funds? 90%? And these speculators aren't looking at the fundamentals?

It's a difficult one to assess. Only BOT would really know. But the reaction of BOT indicates that Thailand is being targeted.

Speculative Attacks

The worry factor for me (living on US pensions) is that I have lost over 12% of my income in one year. So, I'll tighten the belt (I need to lose weight anyway!). The directors of BOT are not worrying about farang pensioners.

The worry factor for Thailand is that many exports are denominated in dollars. Right?

Wrong and right. Most exports (rubber etc) are in Yen. Computer stuff etc is in dollars but this represents only 40% (still considerable) of exports in quantity but only 20% in yeild value per item. The yield in dollars is much less now since it used to rival Tiawan for electronic goods. But the mainstay of thailand exports is still Rice and rubber and we all know the current government reduced rice export prices recently because of this. (much to the consternation of farmers).

Edited December 7, 2006 by Indifferent

[singtokchi]

What are we talking about - it's already 34 - 35 to $US today. Great prediction.

The baht is not at 34-35 vs the dollar. Latest spot quote is 35.66 to the dollar. The think tank is talking about the interbank spot rate, the rate given for fx transactions bigger than USD $50K, not the rate you might get at the local money changer. This is stronger than the baht has been in many years

[Jai Dee]

Thailand to smooth baht volatility - central bank

BANGKOK, Dec 7 (Reuters) - Thailand's central bank will go on intervening to smooth volatility in the baht even though its sharp rise this year rise has not undermined Thai export competitiveness, Governor Tarisa Watanagase said on Thursday.

Thai interest rates were not a key factor inducing increased movements of foreign capital into the Thai stock and bond markets, she told a seminar.

The baht has risen more than 15 percent against the dollar this year.

Source: Reuters - 7 December 2006

[Jai Dee]

Thai baht seen rising further in 2007 - BOT chief

BANGKOK, Dec 7 (Reuters) - The Thai baht is expected to keep on rising against the dollar next year because the U.S. currency is on a weakening trend, Bank of Thailand Governor Tarisa Watanagase said on Thursday.

But Thailand's projected current account deficit next year should slow the baht's rise, she told reporters.

The baht has risen more than 15 percent against the dollar this year.

Source: Reuters - 7 December 2006

[Happy Jack]

My good old New Zealand dollar is also strengthening against the US dollar (the later being arrogantly referred to as THE dollar as if no other part of the world has a monetary system) but staying about the same against the Baht. If one had no faith in America one might think this was a sign that the US dollar is collapsing.

[Jingthing]

Next time you see an American nursing his Nam Soda or Beer Chang for three hours, and then leaves a miniscule tip ... please understand.

[Old Man River]

Again I ask: what percentage of Thai baht transactions are just short term investments by speculators such as mammoth hedge funds? 90%? And these speculators aren't looking at the fundamentals?

It's a difficult one to assess. Only BOT would really know. But the reaction of BOT indicates that Thailand is being targeted.

Speculative Attacks

The worry factor for me (living on US pensions) is that I have lost over 12% of my income in one year. So, I'll tighten the belt (I need to lose weight anyway!). The directors of BOT are not worrying about farang pensioners.

The worry factor for Thailand is that many exports are denominated in dollars. Right?

Wrong and right. Most exports (rubber etc) are in Yen. Computer stuff etc is in dollars but this represents only 40% (still considerable) of exports in quantity but only 20% in yeild value per item. The yield in dollars is much less now since it used to rival Tiawan for electronic goods. But the mainstay of thailand exports is still Rice and rubber and we all know the current government reduced rice export prices recently because of this. (much to the consternation of farmers).

Indifferent, from your responses I know you know the difference, but please read the articles you send out as examples prior to sending them out as it will confuse others. Your link on speculation does not relate to what is happening currently. Instead, it is an overview of what happened 9 years ago. The THB is no longer pegged to the USD and speculators are not shorting the THB. Khun Anoma had a good article in The Nation on either Monday or Tuesday explaining what is currently happening.