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Baht’s rise due to continuous current account surplus: BOT


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35 minutes ago, silver sea said:


 

Thanks for giving your crystal balls a polish.

 

When the polls closed on UK election night, and after the first results started to come in, indicating a Tory victory, GBP was 40.66 THB. By the next morning, it was 40.22, up from 38.00. So although the Tories’ win was big enough to ensure that a second referendum on leave/remain was unnecessary, there was not the big surge in the GBP’s value against the baht that had been predicted by the TVF Brexiteers over the last few months.
 

As has been said many times on these Forums, for TVF expats the most important currency relationship is USD - THB. Over the last three years, the referendum result has been factored in by the markets, and so there was not much movement in the pound on election night.
 

A Jeremy Corbyn Labour victory, or a hung Parliament, would have unsettled the markets in a big negative way, because of the implications for the UK economy.

 

Similarly, a hard Brexit, which could still happen, would also have a big negative effect on the pound’s value.

 

Below is a political prediction for 2020 and 2021 by the Observer’s senior political analyst, Andrew Rawnsley, which he wrote at the end of last December. Politically, he is a centre left, so perhaps a bit of a Blairite (Tony Blair), and who thinks that Boris Johnson is totally untrustworthy as both an individual and as a politician.
 

Andrew Rawnsley:

 

”The UK’s membership of the European Union will be terminated at the end of January, but that’s not Brexit done. We then enter a transition period while there are tough and complex negotiations about the future relationship with our closest neighbours and most important trading partners. 

 

Boris Johnson says he can secure a zero-tariff, zero-quota free trade deal without having to commit to regulatory alignment with the bloc. The EU suggests it will never agree to this. 

 

The Tory leader has further upped the stakes by declaring that the UK will crash out of the transition without a deal if there’s no agreement by the end of the year:
 

https://www.theguardian.com/politics/2019/nov/06/can-britain-reach-a-trade-deal-with-the-eu-by-the-end-of-2020

 

Will he really take such a big risk with the British economy, especially its manufacturers and the livelihoods of the voters in the Midlands and the north of England who helped him to a majority? 

 

By the end of the year, either his bluff will have been called or he will betray those new Tory voters.

 

There will not be another referendum on independence for Scotland in 2020. The SNP will demand it, but without any real conviction that it can get one from a Conservative government that has set an adamantine face against the idea. 

 

This refusal will suit the Nationalists. Current polling suggests that they can’t be confident of winning a referendum now, and a second defeat would surely kill their ambition for a long time. 

 

The SNP’s true aim is to stoke Scottish resentment against Westminster to pave the way for a big win in the elections to the Scottish parliament in 2021. That’s the year with the potential for a constitutional car crash that rips apart the kingdom.”

 

 

If he is right in his prediction, then unfortunately, GBP is going to have a tough two years. Ex pats will count themselves lucky if GBP can maintain its current value during that period.

 

 

 

For the Pound to fetch more Baht we would need a strong Dollar, a strong Pound and a weak Dollar.

 

As things stand we have a very strong Baht, a weak Pound and a Dollar that's just under par at 96.8.

 

The odds that those three currencies will all reverse in tandem is wishful thinking....I think.

 

GBP factors include Brexit and post Brexit trade deals, it's likely that we will also begin to have debt/deficit issues I think...UK breakup is a risk.

 

USD factors include the election next year plus massive deficit and debt, a Trump win could threaten growth.

 

THB factors include export levels that are just off their record highs and tourist numbers that are....somewhere! Low gov. debt, very low foreign debt, consumer debt that is a concern but statistically not bad, foreign reserves that are stellar....water shortages and climate are a threat.

 

Fill in the gaps as you go forward.

 

 

 

 

 

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16 hours ago, madmitch said:

Well, I'm confused as well. If the THB tracks the USD how is there such a fluctuation between the value of the baht against the USD itself?

 

And if a trade surplus creates a strong baht, the currency strength should then create a reduction in exports and tourism, therefore a smaller surplus and the baht should reduce in value. But this hasn't happened.

 

I am no economist and would love to hear a straightforward, non-confusing explanation.

Sorry, I missed your late edit and the second question....here's the answer!

 

A trade surplus exists when a country exports more than it imports, if it's the other way around it's called a trade deficit. If exports start to decline AND imports also start to decline, there's still a trade surplus and that's exactly what has been happening in the case of Thailand. As you say, as the Baht has got stronger exports have started to decline but that has ALSO had a negative effect on imports so Thailand has begun to import less. This is why it's called the balance of trade, it's the balance or gap between the two entities that is important rather than the individual numbers. 

 

"Thailand trade balance unexpectedly shifted to a surplus of USD 0.55 billion in November 2019 from a deficit of USD 0.94 billion in the same month a year earlier and easily beating market consensus of a gap of USD 0.19 billion. This was the seventh straight month of trade surplus, as exports fell 7.39 percent year-on-year to USD 19.66 billion, while imports plunged 13.78 percent to USD 19.11 billion". 

 

https://tradingeconomics.com/thailand/balance-of-trade

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4 hours ago, saengd said:

Sorry, I missed your late edit and the second question....here's the answer!

 

A trade surplus exists when a country exports more than it imports, if it's the other way around it's called a trade deficit. If exports start to decline AND imports also start to decline, there's still a trade surplus and that's exactly what has been happening in the case of Thailand. As you say, as the Baht has got stronger exports have started to decline but that has ALSO had a negative effect on imports so Thailand has begun to import less. This is why it's called the balance of trade, it's the balance or gap between the two entities that is important rather than the individual numbers. 

 

"Thailand trade balance unexpectedly shifted to a surplus of USD 0.55 billion in November 2019 from a deficit of USD 0.94 billion in the same month a year earlier and easily beating market consensus of a gap of USD 0.19 billion. This was the seventh straight month of trade surplus, as exports fell 7.39 percent year-on-year to USD 19.66 billion, while imports plunged 13.78 percent to USD 19.11 billion". 

 

https://tradingeconomics.com/thailand/balance-of-trade

May i ask.

How do you know that the figures. supporting your views are authenic and correct?

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1 minute ago, deej said:

May i ask.

How do you know that the figures. supporting your views are authenic and correct?

The two key figures are the balance of trade or current account values and the amount of the foreign currency reserves. The first numbers represent the difference between the value of imports and exports every month/year and the second is the value of foreign currency that has been earned and banked.

 

Both sets of numbers are published by the BOT weekly/monthly so we can see the consistency over time, it's not as though new bogus numbers are suddenly introduced and slipped under the radar because every one would spot them and ask questions.

 

Secondly, the value of the trade surplus is foreign currency that is banked into the foreign currency reserves, less any funds that are used by BOT to weaken the Baht, plus any FDI, that is a simple math exercise which I've done a couple of times just to check. The numbers are here:

 

https://www.bot.or.th/English/Statistics/EconomicAndFinancial/Pages/StatInternationalReserves.aspx

https://www.bot.or.th/English/Statistics/EconomicAndFinancial/Pages/StatBalanceofPayments.aspx

https://www.bot.or.th/App/BTWS_STAT/statistics/BOTWEBSTAT.aspx?reportID=654&language=eng

 

I hear your next question, how do we know BOT isn't publishing bogus numbers. We don't know for certain but if they are they've been doing it for years in a very coordinated way because all the history is consistent. And if the numbers had been bogus, global entities would have picked up on it at some point because all of these things are inextricably linked in various ways.

 

 

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8 minutes ago, saengd said:

The two key figures are the balance of trade or current account values and the amount of the foreign currency reserves. The first numbers represent the difference between the value of imports and exports every month/year and the second is the value of foreign currency that has been earned and banked.

 

Both sets of numbers are published by the BOT weekly/monthly so we can see the consistency over time, it's not as though new bogus numbers are suddenly introduced and slipped under the radar because every one would spot them and ask questions.

 

Secondly, the value of the trade surplus is foreign currency that is banked into the foreign currency reserves, less any funds that are used by BOT to weaken the Baht, plus any FDI, that is a simple math exercise which I've done a couple of times just to check. The numbers are here:

 

https://www.bot.or.th/English/Statistics/EconomicAndFinancial/Pages/StatInternationalReserves.aspx

https://www.bot.or.th/English/Statistics/EconomicAndFinancial/Pages/StatBalanceofPayments.aspx

https://www.bot.or.th/App/BTWS_STAT/statistics/BOTWEBSTAT.aspx?reportID=654&language=eng

 

I hear your next question, how do we know BOT isn't publishing bogus numbers. We don't know for certain 

 

 

  Thks you have answered  my question.

 #We don.t know for certain#

From a laymans perspective

The figures are fudged.

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1 minute ago, deej said:

  Thks you have answered  my question.

 #We don.t know for certain#

From a laymans perspective

The figures are fudged.

Anything's possible of course, in reality the Baht might just be really really weak and the government is enduring all the economic pain and flack & heat from the US about currency manipulation for nothing, one day the governor might come out and put up his hands and tell us the Baht is only worth the same as the Zimbabwe Dollar......somehow I really really doubt it.

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5 hours ago, saengd said:

Sorry, I missed your late edit and the second question....here's the answer!

 

A trade surplus exists when a country exports more than it imports, if it's the other way around it's called a trade deficit. If exports start to decline AND imports also start to decline, there's still a trade surplus and that's exactly what has been happening in the case of Thailand. As you say, as the Baht has got stronger exports have started to decline but that has ALSO had a negative effect on imports so Thailand has begun to import less. This is why it's called the balance of trade, it's the balance or gap between the two entities that is important rather than the individual numbers. 

 

"Thailand trade balance unexpectedly shifted to a surplus of USD 0.55 billion in November 2019 from a deficit of USD 0.94 billion in the same month a year earlier and easily beating market consensus of a gap of USD 0.19 billion. This was the seventh straight month of trade surplus, as exports fell 7.39 percent year-on-year to USD 19.66 billion, while imports plunged 13.78 percent to USD 19.11 billion". 

 

https://tradingeconomics.com/thailand/balance-of-trade

Thanks. It's the imports reducing that I didn't know about. I would have anticipated imports remaining stable as the cost in baht terms should be reducing but I suppose there's a knock-on effect, for example if exports of products are down them the import of raw materials would also reduce.

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33 minutes ago, saengd said:

Anything's possible of course, in reality the Baht might just be really really weak and the government is enduring all the economic pain and flack & heat from the US about currency manipulation for nothing, one day the governor might come out and put up his hands and tell us the Baht is only worth the same as the Zimbabwe Dollar......somehow I really really doubt it.

I think that 30 THB to USD is the floor that both countries have accepted. Provided Thailand keeps its trade surplus under control, I think Thailand will get away with occasional intervention to keep the THB from falling to 29 or below.

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2 minutes ago, Roy Baht said:

I think that 30 THB to USD is the floor that both countries have accepted. Provided Thailand keeps its trade surplus under control, I think Thailand will get away with occasional intervention to keep the THB from falling to 29 or below.

I agree plus it's a nice round number. ????

 

So if that's true and GBP/USD is at 1.30 currently but the future trade aspects of Brexit are still unclear, the possibilities are a range of 1.20 with no deal or a bad Brexit and 1.40 with a decent deal. I think that translates into something like either 35 or 45 Baht per Pound, give or take.

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2 hours ago, saengd said:

The two key figures are the balance of trade or current account values and the amount of the foreign currency reserves. The first numbers represent the difference between the value of imports and exports every month/year and the second is the value of foreign currency that has been earned and banked.

 

Both sets of numbers are published by the BOT weekly/monthly so we can see the consistency over time, it's not as though new bogus numbers are suddenly introduced and slipped under the radar because every one would spot them and ask questions.

 

Secondly, the value of the trade surplus is foreign currency that is banked into the foreign currency reserves, less any funds that are used by BOT to weaken the Baht, plus any FDI, that is a simple math exercise which I've done a couple of times just to check. The numbers are here:

 

https://www.bot.or.th/English/Statistics/EconomicAndFinancial/Pages/StatInternationalReserves.aspx

https://www.bot.or.th/English/Statistics/EconomicAndFinancial/Pages/StatBalanceofPayments.aspx

https://www.bot.or.th/App/BTWS_STAT/statistics/BOTWEBSTAT.aspx?reportID=654&language=eng

 

I hear your next question, how do we know BOT isn't publishing bogus numbers. We don't know for certain but if they are they've been doing it for years in a very coordinated way because all the history is consistent. And if the numbers had been bogus, global entities would have picked up on it at some point because all of these things are inextricably linked in various ways.

"Do not answer a fool according to his folly, Or you will also be like him. Answer a fool as his folly deserves, That he not be wise in his own eyes." - Proverbs 26:4 and 26:5: 3.
 

Most people in this forum are convinced that BOT and elites are manipulating Baht. In fact, US Treasury also suspect Baht is manipulated but they use data to determine it not their hunch. Also, when US says a currency is manipulated, it means it is kept artificially weak (NOT STRONG) to gain trade advantage. US does not care if the currency is strong. IN fact, they want all currencies to be strong to give US a trade advantage.
 

BOT in fact works against the wishes of the elites. Elites (I meant rich) wants 100% of their Thai earned Baht to be expatriated allow them to invest in foreign countries. They allow only 200K of export income parked in foreign banks. Why not 100%? BOT fears a capital flight that will repeat 1997 crisis.

US treasury wants Thai Baht to be stronger more and go to 25USD/Baht in the next five years with the current trend of current account balance and foreign reserves.

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13 minutes ago, murikamba said:

"Do not answer a fool according to his folly, Or you will also be like him. Answer a fool as his folly deserves, That he not be wise in his own eyes." - Proverbs 26:4 and 26:5: 3.
 

Most people in this forum are convinced that BOT and elites are manipulating Baht. In fact, US Treasury also suspect Baht is manipulated but they use data to determine it not their hunch. Also, when US says a currency is manipulated, it means it is kept artificially weak (NOT STRONG) to gain trade advantage. US does not care if the currency is strong. IN fact, they want all currencies to be strong to give US a trade advantage.
 

BOT in fact works against the wishes of the elites. Elites (I meant rich) wants 100% of their Thai earned Baht to be expatriated allow them to invest in foreign countries. They allow only 200K of export income parked in foreign banks. Why not 100%? BOT fears a capital flight that will repeat 1997 crisis.

US treasury wants Thai Baht to be stronger more and go to 25USD/Baht in the next five years with the current trend of current account balance and foreign reserves.

I don't have much time this morning so here's a very brief response:

 

Your figure of USD 200k is correct but is only part of the picture, the rest of it is on the BOT link below, an extract reads: "Exporters with foreign currency proceeds exceeding the above new threshold will be allowed to use the revenues to offset foreign currency expenses, without having to repatriate the funds. Exporters can simply register with the BOT and provide necessary documentation to commercial banks, without prior approval from the BOT". 

https://www.bot.or.th/English/PressandSpeeches/Press/2019/Pages/n6662.aspx

 

The perceived manipulation issue result not from THB being too weak but from Thailand imposing extensive import tariffs that keep import levels low and create a trade surplus, that results in a foreign currency reserves build up and a current account surplus which makes the Baht strong.

 

Capital flight was not a key factor in the 1997 crash, a hard pegged exchange rate, overseas dollar loans and central bank foreign currency reserves that were locked into long dated securities were.

 

 

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There is a possible win here .. use the surplus gained from exporting to China to import US goods by removing import taxes for US produce. Would act as a proxy, but in the opposite way from the usual. The quality of goods would improve and US would be hapy to get some of it's own cash back.

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