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Baht keeps strength despite coronavirus outbreak, economic decline


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I'm only really interested in the longer term direction, 2, 5 and 10 years and looking at that picture I continue to think THB will remain strong(er), 25 per USD is the future.

Your rationale? And does this analysis say the dollar is weaker against most currencies -- or just the baht in particular? Thanx.

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17 minutes ago, JimGant said:

Your rationale? And does this analysis say the dollar is weaker against most currencies -- or just the baht in particular? Thanx.

A few thoughts.

 

Asia is in the early stages of ascendancy, China in particular has huge amounts of room to grow, it's potential hasn't nearly begun to be tapped yet. Neighboring regional countries will share in that growth, an Asian equivalent of the EU is in the making but without the overhead, more likely an alliance of nations. China is already funding regional trade via currency swaps to escape USD dominance, they are also funding growth in those satellite countries

 

The US and the West are drowning in debt and social care programs from which there's no easy way out, the western system of democracy seems to be moving closer to civil war in some cases, democracy is strained and being tested, China and neighboring countries have no such problem. The US doesn't have much room to grow beyond its borders, neighbors to the North aren't interested and those to the South aren't exactly best friends.

 

Continued globalization might have changed much of that but there is no longer any will, it's become a dirty word. 

 

Thailand and THB - low debt, very low foreign debt, high foreign currency reserves, equal amounts of gold reserves, low social care overheads, available workforce, exports and tourism income, roots in agriculture and farming......so what if the economy takes a hit for a year, what's the impact, it will recover, despite this years downturn there's no compelling reason to believe anything is permanent or lasting, let alone terminal.

 

Developed countries in the West are the opposite of those things in too many cases, especially debt.

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4 minutes ago, KhaoYai said:

Being no expert, I tend to look at the signs I see and listen to what people I know tell me:

 

A coup - the baht stays strong.

Political turmoil - the baht stays strong.

Questionable election result - the baht stays strong.

Business owners that I know (Thai and foreign) - saying things are the worst they've known for a long time - the baht stays strong.

Tourism takes several blows and now the threat of a pandemic - the baht stays strong.

You've listed a bunch of things that don't affect the value of the Baht so why should it not stay strong? Honestly, if you don't understand why it remains strong you can't really be expected to understand how to make it week!

 

 

4 minutes ago, KhaoYai said:

The Thai government late (extremely in some cases) paying for major infrastructure projects - yet the ecomony is fine according to the leader.

Massive rise in household debt.

 

Consumer debt is 70% of GDP, so what, it's neither big nor small to other countries by comparison.

 

4 minutes ago, KhaoYai said:

The global recession in 2008 saw western currencies fall massively - and a lot of ex pats will still be feeling that now because they have never recovered.  The pound fell again as soon as the EU referrendum results started coming in. There has been a slight recovery but in terms of global/economic comparison, how does Thailand's economy still appear to be doing so well? With the pound or Euro, you might say that they have still not recovered after those 2 major events but how does that explain the dollar then?

Your question doesn't make sense to me, the Pound and the Euro are the subjects of different influences than THB, they are functions of totally different economies.

 

 

4 minutes ago, KhaoYai said:

 

One thing is for sure - something's wrong. I don't claim to know why or what it is but it just ain't right.  If any one of the things I listed above took place in most western countries, the currency would take a dive - in Thailand it strengthens. The Corona virus has only cause a little blip so far - how can that be?

Once again, if you don't understand why it remains strong.....! I posted a couple of lengthy posts further back in the thread, they will explain why the Baht is strong and how the Thai economy functions the way it does, you might want to have a read.

 

4 minutes ago, KhaoYai said:

People have said that the baht is being manipulated, I don't know if it is or not but if it is, how can they keep that up so long?

 

As a non 'expert' but one who's been through a number of recessions in his own country, I see all the signs of impending doom, all the pre-cursors to financial ruin but I don't see it happening. To my un-informed mind that says that when it comes, the bang is going to be huge. I have investments in Thailand so I hope not but I just can't understand the current situation.

People are afraid of the things they don't understand and tend to fear the worst, you admit to being uninformed. Why not take a look at those three posts, they will help you.

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11 minutes ago, saengd said:

People are afraid of the things they don't understand and tend to fear the worst, you admit to being uninformed. Why not take a look at those three posts, they will help you.

I'm neither afraid or in need of help - rather than enter into a protracted argument with you I'll simply say, I stand by everything I wrote in my previous post.

 

I will however, just answer one of your points:

 

'You've listed a bunch of things that don't affect the value of the Baht so why should it not stay strong?'

 

Check out what's happend to the currency of other countries where coups have taken place.

Edited by KhaoYai
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18 minutes ago, KhaoYai said:

Whenever this topic comes up there's always a load of 'experts' on here claiming they know what's going to happen. I know nothing of these things and I doubt that in reality, the 'experts' do either - there are way too many factors that affect currencies to give any form of accurate long term forecast. I seem to remember some on here saying the pound would be at 25 baht by now - its actually just over 40.

 

I don't know who you're pointing at when you talk about THB being 25 to the Pound, I'm pretty sure it wasn't me but if you think it was, please let me correct your misunderstanding.

 

I have said that I think THB will go to 25 against USD, that's actually it's long term rate before the 1997 crash, against the Pound that would give something just over 30 or so. FWIW I do think that's the future direction, albeit there will be ups and downs before we get there.

 

This is a deja vu for me because I've been here before on TVF years ago when THB was around 70 and getting stronger. My projection at the time was for 40, +/- 5% and everyone ridiculed me for talking the Pound down and the Baht up (as it such a thing were possible). But hey, we got there in the end and those that didn't believe that direction had to go home because Thailand became too expensive for them, sad really.

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1 minute ago, KhaoYai said:

I'm neither afraid or in need of help - rather than enter into a protracted argument with you I'll simply say, I stand by everything I wrote in my previous post.

It's your choice to remain uninformed as you put it, I'm not sure why you posted if you didn't want explanations or help......oh well, we're done I guess.

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4 minutes ago, KhaoYai said:

I'm neither afraid or in need of help - rather than enter into a protracted argument with you I'll simply say, I stand by everything I wrote in my previous post.

 

I will however, just answer one of your points:

 

'You've listed a bunch of things that don't affect the value of the Baht so why should it not stay strong?'

 

Check out what's happend to the currency of other countries where coups have taken place.

Too funny, Thailand has had 19 coups and we still don't see movement in the Baht, it's part of the landscape here. Honestly, you just don't understand the basic economics of what's going on.

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4 minutes ago, saengd said:

I don't know who you're pointing at when you talk about THB being 25 to the Pound

Don't think it was you - no idea. Just a discussion that took place last year regarding the UK's deal/no deal situation.

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3 hours ago, saengd said:

A few thoughts.

 

Asia is in the early stages of ascendancy, China in particular has huge amounts of room to grow, it's potential hasn't nearly begun to be tapped yet. Neighboring regional countries will share in that growth, an Asian equivalent of the EU is in the making but without the overhead, more likely an alliance of nations. China is already funding regional trade via currency swaps to escape USD dominance, they are also funding growth in those satellite countries

 

The US and the West are drowning in debt and social care programs from which there's no easy way out, the western system of democracy seems to be moving closer to civil war in some cases, democracy is strained and being tested, China and neighboring countries have no such problem. The US doesn't have much room to grow beyond its borders, neighbors to the North aren't interested and those to the South aren't exactly best friends.

 

Continued globalization might have changed much of that but there is no longer any will, it's become a dirty word. 

 

Thailand and THB - low debt, very low foreign debt, high foreign currency reserves, equal amounts of gold reserves, low social care overheads, available workforce, exports and tourism income, roots in agriculture and farming......so what if the economy takes a hit for a year, what's the impact, it will recover, despite this years downturn there's no compelling reason to believe anything is permanent or lasting, let alone terminal.

 

Developed countries in the West are the opposite of those things in too many cases, especially debt.

TH is an ageing population they will have problems in the future. I don't see this mentioned anywhere. 

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3 hours ago, saengd said:

You've listed a bunch of things that don't affect the value of the Baht so why should it not stay strong? Honestly, if you don't understand why it remains strong you can't really be expected to understand how to make it week!

 

Well can you enlighten us which factors can make the baht weak? 

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3 hours ago, KhaoYai said:

Whenever this topic comes up there's always a load of 'experts' on here claiming they know what's going to happen. I know nothing of these things and I doubt that in reality, the 'experts' do either - there are way too many factors that affect currencies to give any form of accurate long term forecast. I seem to remember some on here saying the pound would be at 25 baht by now - its actually just over 40.

 

Being no expert, I tend to look at the signs I see and listen to what people I know tell me:

 

A coup - the baht stays strong.

Political turmoil - the baht stays strong.

Questionable election result - the baht stays strong.

Business owners that I know (Thai and foreign) - saying things are the worst they've known for a long time - the baht stays strong.

Tourism takes several blows and now the threat of a pandemic - the baht stays strong.

The Thai government late (extremely in some cases) paying for major infrastructure projects - yet the ecomony is fine according to the leader.

Massive rise in household debt.

 

The global recession in 2008 saw western currencies fall massively - and a lot of ex pats will still be feeling that now because they have never recovered.  The pound fell again as soon as the EU referrendum results started coming in. There has been a slight recovery but in terms of global/economic comparison, how does Thailand's economy still appear to be doing so well? With the pound or Euro, you might say that they have still not recovered after those 2 major events but how does that explain the dollar then?

 

One thing is for sure - something's wrong. I don't claim to know why or what it is but it just ain't right.  If any one of the things I listed above took place in most western countries, the currency would take a dive - in Thailand it strengthens. The Corona virus has only cause a little blip so far - how can that be?

 

People have said that the baht is being manipulated, I don't know if it is or not but if it is, how can they keep that up so long?

 

As a non 'expert' but one who's been through a number of recessions in his own country, I see all the signs of impending doom, all the pre-cursors to financial ruin but I don't see it happening. To my un-informed mind that says that when it comes, the bang is going to be huge. I have investments in Thailand so I hope not but I just can't understand the current situation.

All things come to those that wait.

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4 hours ago, KhaoYai said:

A coup - the baht stays strong.

Political turmoil - the baht stays strong.

Questionable election result - the baht stays strong.

Business owners that I know (Thai and foreign) - saying things are the worst they've known for a long time - the baht stays strong.

Tourism takes several blows and now the threat of a pandemic - the baht stays strong.

The Thai government late (extremely in some cases) paying for major infrastructure projects - yet the ecomony is fine according to the leader.

Massive rise in household debt.

True! there's a few more you could add like when the main international airport was shut down for weeks, baht stayed strong & so on! (The passing of the King was "supposed" to be the end of the Baht - some said - again ziltch!)

I have never been able to make any sense of it, it was easier pre 97 crash, it was 25 - simple!

The Baht may get weaker in coming weeks against the USD, trouble is most countries currencies are going to weaken, wouldn't bet on the Baht though!

Edited by CGW
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30 minutes ago, BestB said:

Hold on to your horses, things may start to change sooner than expected . Travel bans to Thailand started to come out , UAE, israel and now Eastern Europe so far but adding up

Indeed. UAE banned its citizens from flying there

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53 minutes ago, CGW said:

True! there's a few more you could add like when the main international airport was shut down for weeks, baht stayed strong & so on! (The passing of the King was "supposed" to be the end of the Baht - some said - again ziltch!)

I have never been able to make any sense of it, it was easier pre 97 crash, it was 25 - simple!

The Baht may get weaker in coming weeks against the USD, trouble is most countries currencies are going to weaken, wouldn't bet on the Baht though!

Once again people still looking in the wrong place, why should that death make the baht weak, there is no logical economics based reason.

 

And the main airports were shut down for a few days, not shut for weeks, it's important to be factual about these things otherwise you get the wrong answer.

 

Pre 97 crash the Baht was hard pegged to USD, of course things were more simple, THB had to follow the value of USD. But when they popped the cork and let the genie out of the bottle THB went down like a stone. Now it's fighting it's way back to where it was pre 97 but this time, without the false support of the hard peg.

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2 hours ago, stament said:

TH is an ageing population they will have problems in the future. I don't see this mentioned anywhere. 

True, that's a problem that impacts the labor force. But Thailand is surrounded by poorer countries and is known to be willing to allow Burmese workers in particular to supplement the workforce. In many ways that's a desirable scenario because unemployment is always near zero and the cost of labor is kept low plus there are fewer overheads such as social security.

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On 2/20/2020 at 5:46 PM, saengd said:

The Baht is not fully convertible, it cannot be exported in large amounts, this means that BOT has total control of its value, outsiders cannot take a position (for delivery) against the Baht and manipulate its value. AND it only takes a fairly small amount to move the Baht one way or the other because it is such a small currency.

 

If the BOT has total control of it's value, then why don't they lower the baht since it's hurting the economy a lot?? They promised many times to do it but nothing happened...

 

I can go short/long in the eur/baht by cfd trading. So you all can do the same...i don't know if the billionaires like Soros also can do that with billions but if they can the baht will go...up or down, whatever they like.

 

It takes a fairly small amount to move the baht one way you wrote, then why is nobody trying or doing it? And why do those teams of currency manipulators from the US (the ones who also played the euro down some years ago) not play with the baht? 

 

The bank of Thailand has 200 billion in foreign exchange, that doesn't leave much bahts left for them to play with...They can use it to buy bahts so the price goes up (if they want of course).

 

 

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On 2/20/2020 at 7:22 AM, soalbundy said:

Everything flows, nothing remains, all is flux, nothing is stationary........Heraclitus 500 BC.

I think Hericlitus was referring to the state of his bowels after an Isaan style somtam.

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A useful article in the Thai newspaper whose name may not be mentioned. Google "Exports up for first time in six months" to learn that exports increased to USD 19.6 bill. in January (up 3.35%), the previous record in July was USD 24 bill. but still a very respectable number. 

 

But imports fell to USD 21.2 bill. which means there is still a trade deficit but it's getting smaller.

 

That's good news because the current account surplus will decrease but we need several months of similar performance for it to be effective in reducing THB value and that may not happen.

 

Key export destinations were the US and China following the end of the Phase I trade war, shipments up 10% and 5% respectively. Exports to Taiwan expanded for the 13th month by 13%.

 

So tourism may be taking a hit but exports are looking pretty good, all things considered.

 

 

 

 

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7 hours ago, saengd said:

When BOT meets every morning to set the value of THB for that day it looks at a range of factors including the underlying economics of the country and the degree to which THB was in demand the previous day. Eventually it comes up with a rate and that rate is then set and trading then begins. The FOREX market has to agree that BOT's rate is appropriate, if it doesn't traders will begin to set a rate that think is appropriate and two markets for THB would begin to exist, the onshore  and offshore markets, both would have different rates....this has happened in the past.

So it's the BOT who makes the rate? Not the supply/demand ? And the underlying factors are not tourism, internal war, passing away of the beloved King and so on?? 

It seems the ONLY underlaying factor is export and as long as that's going well the baht will get stronger? Even at export prices based on the current very strong baht the export is still doing very well? I don't get that, Thai rice (i don't know many other thai export products) is expensive these days and much cheaper in neighbouring countries so how can the baht stay strong on the expensive rice exports? Thailand lost it's spot already to be the largest rice exporter some years ago.

 

7 hours ago, saengd said:

 

That system of checks and balances ensures that BOT and the international markets are in synch, it's purpose is to ensure that a central bank doesn't overstate the value of its currency and also to ensure it is not understated also. So even if BOT tried to adjust the exchange rate, without altering the underlying structural components that cause the value to be what it is, the market wouldn't let them.

 

Part Two: all THB trades in the world must go through BOT although by the time BOT sees them they have usually been consolidated, bear in mind that most important trades are in the billions and done by brokers and banks. BOT rules are that banks anywhere in the world may not hold more than a fairly low limit of THB, if they break that rule BOT will not allow that bank to perform any transactions involving THB.....as a result all banks comply. That means that nobody outside of Thailand can amass THB in an account sufficiently large to take a position against it and alter its value. People can trade on account but not for delivery of currency.

 

Foreign Currency Reserves: These perform a specific function, they guarantee trade, that is their primary reason for being. The reserves are held in the 24 different currencies of Thailand's major trading partners as well as in THB but the reserves are denominated or accounted for in USD which is the international standard. BOT can and does enter the market regularly to raise or lower the value of THB and they do so by either selling or buying THB against USD (most selling in order to lower value). But that action alone is not effective on a lasting basis unless the underlying fundamentals are also changed, to keep selling THB and buying USD in an attempt to lower the value of THB is really a waste of time because it's just not effective on a lasting basis.

 

As said many times already, the real problem that causes the value of THB to remain so high is the trade and current account surplus.

Edited 7 hours ago by saengd

So in general the BOT controls the baht, no matter if, what or when......and it's all based on underlying factors which seem to be export, export and export. All the rest isn't playing any role.

 

The BOT already has stated that they do everything they can to lower the baht but so far nothing has happened.

 

Seems an odd story, they have total control of the Baht, state that they do everything they can to lower it but nothing is happening.

 

There must be more to this story...And why are foreign banks (like goldman sachs to name one) not playing with the baht? Those guys also loved to play the euro down and went very far to do so....

 

Tourism is 20% of the Thai economy, at the moment there almost is no tourism going on....so 20% of the economy is down but the baht stays strong. Why is 20% of the thai economy not a good underlying factor to lower the baht?? Is export the rest 80% of the thai economy?

 

And for foreign investors....they should be bothered by civil unrest, floodings, corona virus, no tourism in thailand, and all the rest mentioned above. If they pull out of thailand the baht should get weaker...it's not happening though. And foreign investors should be part of the thai export. 

 

 

 

 

 

 

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8 hours ago, saengd said:

And the main airports were shut down for a few days, not shut for weeks, it's important to be factual about these things otherwise you get the wrong answer.

Are you sure you being "factual" it was closer to two weeks than "few" days! Closed Nov 24th, next flight left 4th Dec, wasn't fully reopened for some time thereafter due to damage, checks, certification.

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2 minutes ago, fruitman said:

So it's the BOT who makes the rate? Not the supply/demand ? And the underlying factors are not tourism, internal war, passing away of the beloved King and so on?? 

It seems the ONLY underlaying factor is export and as long as that's going well the baht will get stronger? Even at export prices based on the current very strong baht the export is still doing very well? I don't get that, Thai rice (i don't know many other thai export products) is expensive these days and much cheaper in neighbouring countries so how can the baht stay strong on the expensive rice exports? Thailand lost it's spot already to be the largest rice exporter some years ago.

 

So in general the BOT controls the baht, no matter if, what or when......and it's all based on underlying factors which seem to be export, export and export. All the rest isn't playing any role.

 

The BOT already has stated that they do everything they can to lower the baht but so far nothing has happened.

 

Seems an odd story, they have total control of the Baht, state that they do everything they can to lower it but nothing is happening.

 

There must be more to this story...And why are foreign banks (like goldman sachs to name one) not playing with the baht? Those guys also loved to play the euro down and went very far to do so....

 

Tourism is 20% of the Thai economy, at the moment there almost is no tourism going on....so 20% of the economy is down but the baht stays strong. Why is 20% of the thai economy not a good underlying factor to lower the baht?? Is export the rest 80% of the thai economy?

 

And for foreign investors....they should be bothered by civil unrest, floodings, corona virus, no tourism in thailand, and all the rest mentioned above. If they pull out of thailand the baht should get weaker...it's not happening though. And foreign investors should be part of the thai export. 

Determining currency exchange rates is not an entirely automated process that is determined exclusively by the FOREX market, the central bank plays a role because only they are in a position to have sight of all the up to date factors that impact the exchange rate, that's why they set the rate daily.

 

Internal wars and the passing of the king are not significant factors that impact the exchange rate on a lasting basis.

 

It's not really export export and export, it's really about the current account. That benefits from the trade surplus from exports but also FDI, it's just that exports is the major contributor.

 

Seems odd that....nothing has happened. BOT has reduced the base rate twice plus they have suspended bond sales. Those things have reduced the inflows of FDI and hot money, exports however remain buoyant. If somebody wanted to turn around the situation with THB today that would involve halving exports or doubling imports but why would they.

 

If you read and understood the earlier post you will know that THB is a restricted currency that overseas banks can hold only in limited amounts. If Goldman's or whoever wanted to take a position on THB they would need to get their hands on a lot currency and that simply isn't possible because the Baht is not freely convertible and cannot be exported. Of course BOT could lift that restriction but that would leave them open to a repeat of the 1997 crash where outsiders took a position on the Baht and caused it to crash.....they are highly unlikely to want to repeat that.

 

Tourism is regarded as an export in economics so that 20% is a part of the larger 65%:

 

Thailand is an export oriented economy with exports accounting for around 65 percent of the GDP. The country mainly exports manufactured goods (86 percent of total shipments) with electronics (14 percent, vehicles (13 percent), machinery and equipment (7.5 percent) and foodstuffs (7.5 percent) being the most important.

 

https://tradingeconomics.com/thailand/exports

 

And whilst tourism is low at present it is not completely dead according to various sources, including posters on TVF from Phuket.

 

As already said earlier, exports for January were over USD 19 bill, that is an increase over the previous month...please read the earlier post to understand the relationship with imports and the trade deficit!

 

Your last para is too convoluted to answer sensibly because I'm not sure what your point or question is! The flu virus is an unknown,  foreign investors will not just pull out of Thailand because of it, whey should they. 

 

 

 

 

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17 minutes ago, CGW said:

Are you sure you being "factual" it was closer to two weeks than "few" days! Closed Nov 24th, next flight left 4th Dec, wasn't fully reopened for some time thereafter due to damage, checks, certification.

It looks like 26 November to 4 December, eight days, during which time USD/THB fell to over 34 and BOT had to intervene in markets.

 

https://en.wikipedia.org/wiki/2008_Thai_political_crisis

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4 minutes ago, saengd said:

It looks like 26 November to 4 December, eight days, during which time USD/THB fell to over 34 and BOT had to intervene in markets.

 

https://en.wikipedia.org/wiki/2008_Thai_political_crisis

Yes, which is more than a few days isn't it, it was quite a while after the 4th before the airport fully reopened due to repairs that were needed and re-certification, I was caught up in it! Yes the odd flight left so in typical Thainess they could tell the world that the airport was "open" again!

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