Thai central bank worried about strong baht, ready to use necessary measures

[Isaan sailor]

17 hours ago, Traubert said:

Nope, the Yuan is pegged to the  Dollar too.

I think i’m losing it—now I give Traubert thumbs up.  Why does he suddenly make sense to me?

[Isaan sailor]

I’ve seen this movie before: the Baht rises uncontrollably—and BoT worries about it, and takes no action.

[Trillian]

2 minutes ago, Isaan sailor said:

I think i’m losing it—now I give Traubert thumbs up.  Why does he suddenly make sense to me?

I'm happy to be corrected on this and with all due respect to Traubert whose views I greatly respect and usually agree with, I think that whilst the Chinese Central Bank may quote the exchange rate in Dollars, it's actual value is determined by the basket of foreign currencies and then converted back to USD for public consumption.

[Susco]

5 minutes ago, Isaan sailor said:

17 hours ago, Traubert said:

Nope, the Yuan is pegged to the  Dollar too.

I think i’m losing it—now I give Traubert thumbs up.  Why does he suddenly make sense to me?

 

Maybe you are indeed losing it

 

https://en.wikipedia.org/wiki/Renminbi

 

Until 2005, the value of the renminbi was pegged to the US dollar.

 

Since 2006, the renminbi exchange rate has been allowed to float in a narrow margin around a fixed base rate determined with reference to a basket of world currencies

[Trillian]

3 minutes ago, Isaan sailor said:

I’ve seen this movie before: the Baht rises uncontrollably—and BoT worries about it, and takes no action.

31.x is nothing, they've endured 29.x without loss of exports.

[EricTh]

What has high gold prices got to do with a strong baht? Does anyone know?

[Trillian]

Just now, EricTh said:

What has high gold prices got to do with a strong baht? Does anyone know?

People selling Dollars and buying gold in THB as a safer haven than USD hence the gold price is increasing.

[Susco]

1 minute ago, Trillian said:

People selling Dollars and buying gold in THB as a safer haven than USD hence the gold price is increasing.

As far as I'm aware, gold price is the same worldwide, and I doubt the Thais control the gold price

[hotchilli]

17 hours ago, worgeordie said:

What Thailand needs is a Brexit like problem,then the Baht would fall,

just like Sterling, Maybe someone should go to the vaults and find that

there is not so much foreign reserves as they thought .and they have not

put aside the Submarine money.............anything really........something.

regards worgeordie

 

It had a declining tourism business all of last year, it had a plummeting local economy with exports tanking, then Corvid came along... and it's still rising.

Teflon coated Baht.

[ross163103]

I remember years ago when they said they could keep it 36 to the dollar......55555

[Trillian]

14 minutes ago, Susco said:

As far as I'm aware, gold price is the same worldwide, and I doubt the Thais control the gold price

Sorry, typed in a hurry, I am at work and trying to do lots at once.

 

Thai export bills are paid in USD or at least 60% of them are. BOT has relaxed the rules regarding how and when those Dollars must be repatriated. But rather than hold onto them and invest in USD, many exporters are trading the dollars for Thai gold in the Thai market, that has the effect of strngthening THB because Thai gold is denominated in Baht. Bottom line is people loosing confidence in USD because of geo politics and because of US debt, they'd rather hold gold and so USD is weakening.

Edited June 2, 2020 by Trillian

[newnative]

Blah, blah, blah.  Yes, they are 'worried'.  Just like they were worried last week and last month and last year.  And just yesterday, too.  Yet another 'vow' to do something.  Throw it on the pile with all the other vows and promises.  

[Trillian]

1 minute ago, newnative said:

Blah, blah, blah.  Yes, they are 'worried'.  Just like they were worried last week and last month and last year.  And just yesterday, too.  Yet another 'vow' to do something.  Throw it on the pile with all the other vows and promises.  

What would you do if you were them?

[Brunolem]

18 minutes ago, Trillian said:

 

Thai export bills are paid in USD or at least 60% of them are. BOT has relaxed the rules regarding how and when those Dollars must be repatriated. But rather than hold onto them and invest in USD, many exporters are trading the dollars for Thai gold in the Thai market, that has the effect of strngthening THB because Thai gold is denominated in Baht. Bottom line is people loosing confidence in USD because of geo politics and because of US debt, they'd rather hold gold and so USD is weakening.

I didn't know that Thai exporters were buying gold instead of hoarding dollars...smart move anyway.

 

It will be interesting to see how many trillion dollars the US will be able to create out of thin air, before joining Ancient Rome in the cemetery of ruined empires...

[newnative]

10 minutes ago, Trillian said:

What would you do if you were them?

Not an economist but maybe start with pulling the trigger on the 'necessary measures' he is 'ready to use'.  

[Trillian]

1 minute ago, newnative said:

Not an economist but maybe start with pulling the trigger on the 'necessary measures' he is 'ready to use'.  

Fair enough. I think the problem is that some of the triggers have large scale implications. For example, one trigger might be to lay out a road map showing how most import tariffs will be removed over a twenty four month period. That would cause imports to rise, the trade gap to shrink and THB to revalue. But it would also put all Thai companies on notice that their products were about to get some serious overseas competition and as a result many will go to the wall. Ditto competition from other countries apart from Japan, Japan would not be happy and they have huge unrepatriated funds in Thailand from their automotive businesses....those sorts of implications.

[Trillian]

Another option might be to make the currenct fully convertible, allow it to be freely exported. But doing that leaves them open to attack by currency traders offshore, a repeat of 1997 with Soros and co., BOT would have to think long and hard before doing something like that.

[PatchinExPat]

Better do something, my wife's company has had plenty orders

but now fulfilling the last few. Costumers looking to other 

countries and companies and a 100 folks jobs hang by a thread.

[fulhamster]

18 hours ago, Kullstar said:

We definitely need another bloodless coup???????? That'll fix it.

The last 2, the airport closure, etc etc did nothing to the baht.

Even cutting interest rates made it stronger.

 

[KhunFred]

How strange, given the 1997 crash that is still in public memory. Is an actual ECONOMIST in charge of dealing with this problem?? It's like they ignore all of reality and continue to shift blame. Very Trump-like in character.

[Mavideol]

2 hours ago, Isaan sailor said:

I think i’m losing it—now I give Traubert thumbs up.  Why does he suddenly make sense to me?

 maybe it's worth reading a little about peg currencies, China did it because it helped their economy/exports. Many countries do peg to the U.S. dollar because their main source of income is derived from tourism/goods paid in dollars.

 

To keep the yuan artificially low and support robust export activity, the People's Bank of China engages in currency purchases.

This currency manipulation has helped China thrive, as the nation's economy has repeatedly experienced robust growth rates of more than 10% over the last decade. China’s industrial sector has done particularly well.

 

https://www.investopedia.com/articles/forex/030616/why-chinese-yuan-pegged.asp

The Chinese yuan has had a currency peg since 1994. This approach makes Chinese exports cheaper and, therefore, more attractive compared to those of other nations. By motivating the global marketplace with greater motivation to buy its goods, China ensures its economic prosperity.

[Traubert]

2 hours ago, Trillian said:

I'm happy to be corrected on this and with all due respect to Traubert whose views I greatly respect and usually agree with, I think that whilst the Chinese Central Bank may quote the exchange rate in Dollars, it's actual value is determined by the basket of foreign currencies and then converted back to USD for public consumption.

It is indeed in a basket of floating currencies which I think includes Euro, Pound and Yen but the bully boys call the shots and it is rounded off to a 3 cent (I think) limit to avoid accusations of currency manipulation and to pi33 Mr Trump off.

 

 

 

[Trillian]

1 hour ago, KhunFred said:

How strange, given the 1997 crash that is still in public memory. Is an actual ECONOMIST in charge of dealing with this problem?? It's like they ignore all of reality and continue to shift blame. Very Trump-like in character.

I think the answer to your question is yes, actual economists are in charge, in the form of a restructured and revamped BOT and they have done their job superbly well as evidenced by the strength of the currency and the foreign currency reserves. Let's face it, the problem they have today is a rather nice one, how to make an overly strong currency weak, their are central banks that would kill to have the same problem.

[Isaan sailor]

11 minutes ago, Trillian said:

I think the answer to your question is yes, actual economists are in charge, in the form of a restructured and revamped BOT and they have done their job superbly well as evidenced by the strength of the currency and the foreign currency reserves. Let's face it, the problem they have today is a rather nice one, how to make an overly strong currency weak, their are central banks that would kill to have the same problem.

I think you’re looking at it from the wrong side of the binoculars.  A strong Baht will hurt exports, discourage tourism, and most importantly, discourage western corporations from moving their Chinese supply lines to Thailand.

Edited June 2, 2020 by Isaan sailor

[Susco]

3 hours ago, Brunolem said:

I didn't know that Thai exporters were buying gold instead of hoarding dollars...smart move anyway.

How would another TV poster know what Thai exporters are doing with their money?

 

After all, if they want to buy Thai gold, they first have to repatriated their Dollars to Thai Baht.

[Trillian]

1 minute ago, Susco said:

How would another TV poster know what Thai exporters are doing with their money?

 

After all, if they want to buy Thai gold, they first have to repatriated their Dollars to Thai Baht.

It's been reported in the Thai press and the Western business press on a couple of occasions, all you have to do is read the right parts of the papers from time to time!

 

Re. Gold: and that's exactly the problem, repatriate USD earnings, sell them to BOT (which they are obliged to do) and recieve THB, then buy gold. The first part of that is the issue and is what causes THB to strengthen, selling USD and buying THB. The fact they are buying Thai gold is almost irrelevent, they could be buying almost anything. But the reason gold is mentioned is to reinforce that exporters increasingly don't want to hold USD and since that's the major reserve currency the only option that's left for them that's a safe haven is gold. 

[Trillian]

11 minutes ago, Isaan sailor said:

I think you’re looking at it from the wrong side of the binoculars.  A strong Baht will hurt exports, discourage tourism, and most importantly, discourage western corporations from moving their Chinese supply lines to Thailand.

But 31.x is not that strong historically, both exports, FDI and tourism have performed well at much lower levels, albeit the expats and the Western tourists don't like it because they've seen much more attractive levels (to them) in the past. Ask yourself, what's a central bank to do when their currency is at that level having strengthened from much lower levels than in the past, Oh we must make the Baht weaker so that tourists and expats have more baht for their foreign currency....I don't think so. Also ask yourself, what if the real value of THB was 25 and not 31.x because that's where it's headed over the next ten years, I'm certain.

[Susco]

6 minutes ago, Trillian said:

The fact they are buying Thai gold is almost irrelevent, they could be buying almost anything. But the reason gold is mentioned is to reinforce that exporters increasingly don't want to hold USD

But since at that point they are already out of the USD and have their money in THB which continuously strengthens against most currencies, why would they buy anything?

[Trillian]

5 minutes ago, Susco said:

But since at that point they are already out of the USD and have their money in THB which continuously strengthens against most currencies, why would they buy anything?

For a variety of reasons: Thai's typically don't hold cash, they buy something with it and the value of Thai gold has been rising for quite some time so it's seen not only as a safe haven but as a good investment also. If you've been following the subject of gold in the Thai press you'll have seen the long queues of locals at gold shops in Bangkok's Chinatown, all waiting to sell gold because the price is so high, the gold buying spree in Thailand has been going on for some years and many are now getting out of the market by capitalizing on large gains, others are still sitting and waiting. To be clear, exporters buying Thai gold is an historic issue that's been going on for some time. Do yourself a favour, google some of the press reports on the subject, there's loads out there. 

[Brunolem]

49 minutes ago, Isaan sailor said:

A strong Baht will hurt exports, discourage tourism

I don't about you, but when I travel abroad, my first concern is not to study how the currency of the concerned country has evolved in time.

 

For example, before the virus story, I was planning to visit Mongolia and I never gave any consideration to the level of the local currency in my choice.

 

As I said in another thread, I have seen many times foreigners waiting at money exchange booths, having no idea how many baht they were going to get in exchange for their bank notes.

 

The exchange rate is much more of a concern for retired expatriates than for tourists.

Edited June 2, 2020 by Brunolem