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

[Nong Khai Man]

34 minutes ago, Brunolem said:

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.

The exchange rate is much more of a concern for retired expatriates than for tourists......That My Friend is Soooooo True....

[Trillian]

And it might just be that expats are the only ones who really care, at present levels, it might be that all the other groups, tourists and exporters, just get on with things without complaining. Much of the complaining by posters about how the strong baht affects exports might really be a proxy for, I wish the baht were weaker because I'm getting squeezed.

[nkg]

On 6/1/2020 at 4:25 AM, smedly said:

been saying it for months now - the Thai baht is being manipulated because it floats and is basically free to roam 

 

They are right in their assessment that the strength doesn't match the economic climate especially with a 2 trillion bailout loan on the cards which they will never be able to pay

 

I suggest people do some research on 1997 crash - the similarities are obvious

 

Thailand have $200 billion of foreign exchange in the bank, approximately 6 trillion baht. So they might not find it as hard as you think to pay off a 2 trillion baht loan.

[uli65]

the never ending story with the magic foreign reserves, what a joke

[Trillian]

6 minutes ago, uli65 said:

the never ending story with the magic foreign reserves, what a joke

If you don't understand, why not just say so!

[uli65]

try to get rid of your awkward thai blindness

[Trillian]

Learn something about economics, read more books, not paperbacks and comics, study subjects to learn fact rather than rhetoric, those things will serve you well as you mature and find your way in life.

[Stygge]

On 6/1/2020 at 10:11 AM, Trillian said:

You should educate yourself as to which currencies use which type of currency management before being critical of other peoples posts!

 

"Managed float regime is the current international financial environment in which exchange rates fluctuate from day to day, but central banks attempt to influence their countries' exchange rates by buying and selling currencies to maintain a certain range. The peg used is known as a crawling peg".

 

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

 

In 1997 Thailand had very little foreign currency reserves, what they had was tied up in long dated securities. Today they have over USD 220 bill. In 1997 Thailand had huge amounts of USD denominated debt, today less than 4% of government debt is in a foreign currency. The differences between 1997 and today are stark, there is hardly no similarity whatsoever.

 

The strength of THB comes mostly from Thailand's trade surplus, it exports more than it imports, even now in the bad times that is still true. For Thailand to weaken the Baht the country will need to open up and allow more imports and stop protecting favored countries supplies such as Japan and get rid of the mononopoly Thai business has over supply of goods.

True. Trading surplus is a major factor for at strong currency. So how do you aquire a trading surplus over time with a strong currency? Usually a strong currency inhibit a trade surplus over time because the the cost of production rise and competitness goes down (workers wages goes up one factor).
Well, Thailand has a killer app.
Here is how you do.
1. Impose a very low minimum wage, just enough so that even a thai must struggle to survive on it.
2. See to it that this minimum wage becomes the norm for trade and industry labor.
3. No social benifits provided so that people have to take the jobs with offered minimum wage or starve.
4. No sexual education so that girls get pregnant early and stop school and have to take any job to provide.
5. Poor education mainly aiming fo just learning to read and write and copy material for the masses ensures a labor force that will have few options but minimum wage jobs.
6. Allow a great influx from even cheaper labor from poor neighbour countries with no labor rights whatsoever to keep away any demands for payraise.
7. Convince the masses thier situation is determined by celesteral authorities and can´t be changed in this life. But if you are happy with your lot now the reward comes later in a gloirous rebirth.
 

Now you have a work force that works for peanuts and and because of that the strong currency doesn´t hamper your competitness for export.
 

As a member of the ruling class you can now enjoy a currency that allows you to make cheap investments abroad and the safety of knowing you can quickly run away if the masses should start to rumble. Also you can get low prices on important luxury goods as long as the good time lasts.

So now you can enjoy the advantages of a strong currency without its negative effect.

But of course there is one factor for making this heaven possible.
You must have an authoritarian ruling for this. Can´t be done in a democracy.

[Brunolem]

6 minutes ago, Stygge said:

True. Trading surplus is a major factor for at strong currency. So how do you aquire a trading surplus over time with a strong currency? Usually a strong currency inhibit a trade surplus over time because the the cost of production rise and competitness goes down (workers wages goes up one factor).
Well, Thailand has a killer app.
Here is how you do.
1. Impose a very low minimum wage, just enough so that even a thai must struggle to survive on it.
2. See to it that this minimum wage becomes the norm for trade and industry labor.
3. No social benifits provided so that people have to take the jobs with offered minimum wage or starve.
4. No sexual education so that girls get pregnant early and stop school and have to take any job to provide.
5. Poor education mainly aiming fo just learning to read and write and copy material for the masses ensures a labor force that will have few options but minimum wage jobs.
6. Allow a great influx from even cheaper labor from poor neighbour countries with no labor rights whatsoever to keep away any demands for payraise.
7. Convince the masses thier situation is determined by celesteral authorities and can´t be changed in this life. But if you are happy with your lot now the reward comes later in a gloirous rebirth.
 

Now you have a work force that works for peanuts and and because of that the strong currency doesn´t hamper your competitness for export.
 

As a member of the ruling class you can now enjoy a currency that allows you to make cheap investments abroad and the safety of knowing you can quickly run away if the masses should start to rumble. Also you can get low prices on important luxury goods as long as the good time lasts.

So now you can enjoy the advantages of a strong currency without its negative effect.

But of course there is one factor for making this heaven possible.
You must have an authoritarian ruling for this. Can´t be done in a democracy.

This is totally wrong!

 

Look at Germany when it still had the DM currency.

 

The DM was constantly appreciating against other currencies, and yet German workers were not underpaid semi slaves, on the contrary, they enjoyed a very high standard of living.

 

Meanwhile German exports were not hampered in the least, on the contrary, they were booming.

 

The same could be said about Switzerland.

 

The currency race to the bottom is a new "fashion", a consequence of the 2008-2009 financial crisis, which has never been really delt with.

 

Historically, debasing, or debauching, a currency has never been a recipe for economic success.

 

Until now, Thailand has done very well to resist this temptation.

[Trillian]

9 minutes ago, Stygge said:

True. Trading surplus is a major factor for at strong currency. So how do you aquire a trading surplus over time with a strong currency? Usually a strong currency inhibit a trade surplus over time because the the cost of production rise and competitness goes down (workers wages goes up one factor).

You over complicated the issue, the real answer is not those things and is much more simple. If you export more than you import you will always have a trade surplus and the currency will strengthen. The Thai way to ensure that happens is to protect home markets and selected/favored nation importers by imposing huge tarrifs on and restricting imports, job done! There's no imported inflation because there's hardly any imports, production costs remain stable because there is no home grown inflation and competitiveness is not an issue because there is no competition.

[metisdead]

Some off topic posts have been removed. 

[Stygge]

8 minutes ago, Brunolem said:

This is totally wrong!

 

Look at Germany when it still had the DM currency.

 

The DM was constantly appreciating against other currencies, and yet German workers were not underpaid semi slaves, on the contrary, they enjoyed a very high standard of living.

 

Meanwhile German exports were not hampered in the least, on the contrary, they were booming.

 

The same could be said about Switzerland.

 

The currency race to the bottom is a new "fashion", a consequence of the 2008-2009 financial crisis, which has never been really delt with.

 

Historically, debasing, or debauching, a currency has never been a recipe for economic success.

 

Until now, Thailand has done very well to resist this temptation.

True. But Germany, andd even Switzerland and Japan before had uniqe exports. The German export industry is highly technical and sofisticated know how. Their products are not subject to competition the same way and they can/could keep a strong currency and still export. Thailand export manily low end goods, assembled in Thailand by foreign companies. This kind of export is subject to much competition and the price is the determaning factor.

[mrtc77]

On 6/1/2020 at 10:51 PM, yourauntbob said:

The baht is not getting stronger, if it was then the prices you list above would be going down not up.  What is happening is that the baht is weakening more slowly than the major currencies due to all the "stimulus" that many western countries are pumping out.  Most of these "stimulus" packages are financed by central banks (o.e. printing more money).  As those central banks flood the market with excess currency the value of those currencies goes down faster than the Thai Baht which gives the illusion of a strong currency.  

 

So if you want to know who to blame for the lack of value your home currency now demands, blame your home government/central bank.  Its funny to hear expats on this forum blame the Thai government for the lack of purchasing power of their home counties currency.  

 

The Thai central bank would be wise to increase the value of the baht rather than decrease.  A strong currency would lead to economic growth through foreign investment.   It would also result in a price drop on goods and services within the economy which would benefit the Thai people in the long run.  

When the thb/usd rate was at 29 all prices especially imported goods were still going up. Seems to prove your personal theory wrong. 

[Brunolem]

2 hours ago, Stygge said:

True. But Germany, andd even Switzerland and Japan before had uniqe exports. The German export industry is highly technical and sofisticated know how. Their products are not subject to competition the same way and they can/could keep a strong currency and still export. Thailand export manily low end goods, assembled in Thailand by foreign companies. This kind of export is subject to much competition and the price is the determaning factor.

Yes, Thailand is a developing country, still relying too much on agricultural exports where there is lot of pricing competition.

 

Yet, if the baht is strengthening, it means that exports are still doing well, despite its level...or maybe it is the imports which are not doing well...

 

Anyway, considering the level of intervention by the major central banks these days, it is impossible to determine what is the fair value of a currency, because this value is not established by free markets.

 

[Trillian]

4 hours ago, Brunolem said:

Yes, Thailand is a developing country, still relying too much on agricultural exports where there is lot of pricing competition.

 

Yet, if the baht is strengthening, it means that exports are still doing well, despite its level...or maybe it is the imports which are not doing well...

 

Anyway, considering the level of intervention by the major central banks these days, it is impossible to determine what is the fair value of a currency, because this value is not established by free markets.

 

Imports in March and April were 20.8 (USD/bill) and 16.5 respectively.

Exports during the same period were 22.4 and 18.9 respectively.

Typically, the value of exports is around 2.5 bill. higher than imports.

 

I don't agree the fair value of THB is not determined by free markets. The international FOREX system calculates the THB exchange value based on transactions that it sees. That value has to be agreed or adjusted by BOT each day at the morning fix. Exchange transactions performed in Thailand form part of the FOREX system. The only factor that differentiates THB from other currencies is the absence of large volume, for delivery, international broker to broker or finance house to finance house transactions that take place outside Thailand, there aren't any that don't involve Thai banks or the Thai Central Bank.

 

Edited June 3, 2020 by Trillian

[Stygge]

10 hours ago, Brunolem said:

Yes, Thailand is a developing country, still relying too much on agricultural exports where there is lot of pricing competition.

 

Yet, if the baht is strengthening, it means that exports are still doing well, despite its level...or maybe it is the imports which are not doing well...

 

Anyway, considering the level of intervention by the major central banks these days, it is impossible to determine what is the fair value of a currency, because this value is not established by free markets.

 

Thailand can keep up export of common and price sensetive products because the thai junta artificially keep the workers wages down. Somthing has to give for good export with strong currency. In Thailand it´s the wages. They are so low you can still export to competitive prices. No strikes, no unions allowed to disrupt this fact.  Thai workers are in fact paying the price for the strong currency. The ruling class reap the benifits.

[Brunolem]

8 hours ago, Stygge said:

Thailand can keep up export of common and price sensetive products because the thai junta artificially keep the workers wages down. Somthing has to give for good export with strong currency. In Thailand it´s the wages. They are so low you can still export to competitive prices. No strikes, no unions allowed to disrupt this fact.  Thai workers are in fact paying the price for the strong currency. The ruling class reap the benifits.

It is true that some incomes never seem to change.

 

I have been here for more than 20 years and, as far as I remember the minimum wage has remained at about 300 baht per day.

 

And many workers, notably in Isaan are paid less than that.

 

Taxi fares have remained the same, starting at 30 or 35 baht for a taxi meter in Bangkok, or 10 baht for a songthaew in Pattaya, despite the fact that the price of gasoline has doubled (except during the actual ongoing crisis with the crash of the oil price).

 

Meanwhile, prices in supermarkets have doubled or tripled during that same period of time.

 

Finally, household debt has exploded higher.