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Baht’s rise worries govt; BOT blames it on a weaker dollar


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Baht’s rise worries govt; BOT blames it on a weaker dollar

By The Nation

 

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Though the Finance Ministry is worried about the fast rising baht, the central bank assures that the baht is only strengthening in line with regional currencies. 

 

Finance Minister Uttama Savanayana said on Thursday (June 11) that the Bank of Thailand understands that the currency exchange rate is necessary to support economic recovery. 

 

“The central bank knows that the baht exchange rate should move in line with the Finance Ministry’s and government economic plan for recovery, and that it is responsible for the range of the baht’s movement,” he said. 

 

His comments came after the baht passed the Bt31 to the dollar mark to rest at its strongest point of Bt30.82 before closing at Bt30.95 on Thursday closing. 

 

The Bank of Thailand (BOT), however, is saying the baht is moving in line with regional currencies. 

 

“As of June 11, the baht has risen 2.71 per cent against the US dollar since the end of May,” assistant BOT governor Chantawan Sutcharitkul said, pointing out that the baht is the third strongest currency in the region after Indonesia’s rupiah and South Korea’s won. 

 

The actual reason for Asian currencies rising against the greenback is that the US currency is weakening, she said. 

 

Also, capital is flowing back into Thailand as investors who previously moved money out to invest overseas are now bringing the money back, while foreign investors have returned to the equity and Thai bond markets, but their net buys are not that much, she said. 

 

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She also warned of exchange rate volatility due to uncertainty in the global economy, financial markets and Thai economy. Businesses that have engaged in international trade have to regularly hedge their risks where the exchange rate is concerned. 

 

She added that importers and exporters should not rely solely on the dollar when quoting a price for their goods and services, they should also use other currencies, especially when trading within the region. 

 

Naris Sathaphondecha, senior director at TMB Analytics, said the baht rose on Thursday after the US Federal Reserve predicted slow recovery saying it may take two to three years and signalled that it was maintaining low key policy rates until 2022. 

 

Also, global financial markets have been flooded by liquidity injected by central banks in Japan, US and Europe. Besides, money is flowing into Thailand as the economy is showing signs of improvement as the government is easing the Covid-19 lockdown measures. 

 

Since early June, foreign investors have made net purchases of Thai equities and bonds worth Bt6.5 billion and Bt23 billion respectively, he said, adding that the dollar’s weakening was also contributing to the baht’s rise. 

 

“The dollar over the past three days fell by 0.85 per cent, but the baht rose by 1.6 per cent. The baht was the strongest in the region followed by the Japanese yen, which rose 1.4 per cent, and the South Korean won, which rose 0.68 per cent in the same period,” he said. 

 

The baht may stay within the Bt30.5 and Bt31 range and is likely to rise until the end of this month. 

 

However, it may fall to Bt31.5 to a dollar in the third quarter in line with economic fundamentals. The current account is expected to be at a deficit of 3 to 4 per cent of the GDP, reversing from the usual 6 to 8 per cent surplus to the GDP in recent years. 

 

The government’s efforts to curb the spread of Covid-19 has demonstrated an outstanding performance in relation to neighbouring countries, which has also pushed the baht up. He expects the central bank to introduce extra measures to curb the baht’s rise and the Finance Ministry to launch additional stimulus packages. 

 

Jitipol Puksamatanan, chief of market strategy at SCB Securities, said the baht rose on Thursday because exporters sold off their dollars out of panic over the baht’s fast appreciation. Early this year, most companies had estimated one dollar to cost Bt30, so selling their dollars now, they will only be making a small profit, not a loss from the exchange rate, he added.

 

Source: https://www.nationthailand.com/business/30389469

 

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-- © Copyright The Nation Thailand 2020-06-12
 
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23 minutes ago, RichardColeman said:

I really don;t get it. Seems one day they say the baht is high due to the US economy being bad, and the next they say its high as the dollar is strong on US economy figures

Scenario I - If the Dollar (index) is weak, overseas investors will invest in other currencies and FDI flows into Thailand become strong (USD 187 million in one week this month), that pushes the value of THB higher as USD is sold and THB is purchased. The US Dollar Index is today 96.75%.

 

Scenario II - If the Dollar (index) is strong, FDI flows are much less of an issue. But because Thailand is an export led economy and export bills are settled mostly in USD, THB accumulates strong(er) dollars which are then sold and THB is purchased.

 

Scenario I would be OK if it were not for foreign funds inflows.

 

Regardless of Dollar strength or weakness the problem is the trade surplus which is why the Baht is projected to fall to 31.50 in 3Q20 when there will be a trade deficit.

Edited by Trillian
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19 hours ago, webfact said:

Baht’s rise worries govt; BOT blames it on a weaker dollar

Quite possibly that is true, but the Baht does seem to be teflon coated, economy in ruins, tourism non-existent. Unemployment at an all time high, bail-outs and subsidies everywhere, yet the baht is remaining strong?

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1 hour ago, a977 said:

Instead of worrying about it get off your a##es and do something about it.

Please tell me what to do.  I have seen my pension go from 73 to 38.  I'd love to take some action.

Edited by mikebell
poor punctuation.
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1 hour ago, hotchilli said:

Quite possibly that is true, but the Baht does seem to be teflon coated, economy in ruins, tourism non-existent. Unemployment at an all time high, bail-outs and subsidies everywhere, yet the baht is remaining strong?

Things are not as bad as you make out and that's part of the problem, Thai GDP is forecast to dip 5.5% this year, the UK just dipped 20%! Exports had four very good months this year, the next couple will probably not be great. Tourism is in trouble so far this year but it's only 12% of GDP, if the loss in tourist numbers is 50% for the entire year that's still within the 5.5% estimate. And unemployment is not good either but TBH we've seen lots and lots of cases of where people have lost their jobs and have adapted out of necessity, they're struggling but they're getting by and this wont last forever. And capital inflows resulting from a weak USD have helped bolster the numbers, nobody should be surprised the Baht remains strong.

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13 hours ago, natway09 said:

specially the "nanny states"

"Nanny States", aw shucks, how long has it been since I have heard that bleat?! Ok, so Maybe I wear rosy shaded glasses, but it takes me back to a kinder, gentler time. 

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13 minutes ago, Trillian said:

Things are not as bad as you make out and that's part of the problem, Thai GDP is forecast to dip 5.5% this year, the UK just dipped 20%! Exports had four very good months this year, the next couple will probably not be great. Tourism is in trouble so far this year but it's only 12% of GDP, if the loss in tourist numbers is 50% for the entire year that's still within the 5.5% estimate. And unemployment is not good either but TBH we've seen lots and lots of cases of where people have lost their jobs and have adapted out of necessity, they're struggling but they're getting by and this wont last forever. And capital inflows resulting from a weak USD have helped bolster the numbers, nobody should be surprised the Baht remains strong.

I take on board what you say, but I have doubts that 5.5% dip in GDP is reality, more like a sugar coated figure from the government to soften the bad news. Tourism if you look at the whole spectrum I believe is higher than 12% more like 20% if you consider the whole supply chain, not just the income from tourists spending but also tax revenue from establishments and staff taxes. 
If Thailand was honest I bet it's GDP is going to take a hit of around 20%-25% with tourism and struggling businesses coupled together.

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Just now, hotchilli said:

I take on board what you say, but I have doubts that 5.5% dip in GDP is reality, more like a sugar coated figure from the government to soften the bad news. Tourism if you look at the whole spectrum I believe is higher than 12% more like 20% if you consider the whole supply chain, not just the income from tourists spending but also tax revenue from establishments and staff taxes. 
If Thailand was honest I bet it's GDP is going to take a hit of around 20%-25% with tourism and struggling businesses coupled together.

You may well be right about the GDP estimate, I dunno.

 

Tourism is 20% of exports, exports is 60% of GDP so that's how we arrive at the 12% of GDP figure. Is 20% of exports accurate, again I dunno but we have to put a stick in the ground somewhere and that's the one that's been most quoted by gov. and the BOT. If somebody would come up with a more accurate or reliable percentage and tell us how they'd arrived at it, I'd sign up to it, until then however.

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6 minutes ago, spidermike007 said:

More lies and deflection. Actually closer to 6% in 6 weeks. And the dollar has remained fairly steady against the looney and the Aussie dollar. It has lost some against the Euro. 

I'm as keen as anyone to understand the true position but there's no justification to support your 6% in 6 weeks figure. GDP figures come out quarterly, 1Q20 was -1.8%, next figures due in July for 2Q20, let's see what they say. And just to remind, those are quarterly figures, not annual changes to GDP which is what the 5.5% represents.

 

https://tradingeconomics.com/thailand/gdp-growth-annual

Edited by Trillian
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When the president of the US wants a weak dollar and encourages measures to weaken the dollar even more then yes the Thai Bhat will be stronger. Not alot Thailand can do to strengrhen the US dollar. The good old days of 40 bhat to the dollar will not be seen in my life time.

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58 minutes ago, mikebell said:
2 hours ago, a977 said:

Instead of worrying about it get off your a##es and do something about it.

Please tell me what to do.  I have seen my pension go from 73 to 38.  I'd love to take some action.

let me get this straight. you have sat and watched the value of your money be decimated over the last 10 years and done what exactly ? you stayed in a place and willfully watched your hard earned money vanish in front of your own eyes ? 

 

and your asking what to do ? you would love to take some action ? 

 

you're the reason facepalm memes were invented. 

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10 years of trying to deal with the rise of the bhat and the result is always the same so nothing learnt in the decade and no prospect of anything changing in the near future, if they called it a tv  or radio show it would probably be called "I haven't a clue."

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5 hours ago, mr mr said:

let me get this straight. you have sat and watched the value of your money be decimated over the last 10 years and done what exactly ? you stayed in a place and willfully watched your hard earned money vanish in front of your own eyes ? 

 

and your asking what to do ? you would love to take some action ? 

 

you're the reason facepalm memes were invented. 

If somebody said to you today that in ten or fifteen years time the value of your currency will be worth half of what it is today, how would you respond? And if your target currency belonged to a third world country that had just emerged from national bankruptcy, one where 90% of the population was rural poor and the literacy rate was extremely low whilst your  home currency was a reserve currency, would you believe that was likely or even possible? If you were honest you would say no, of course not and chances are you wouldn't have done much differently.....if you were honest that is!

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2 hours ago, Trillian said:

If somebody said to you today that in ten or fifteen years time the value of your currency will be worth half of what it is today, how would you respond? And if your target currency belonged to a third world country that had just emerged from national bankruptcy, one where 90% of the population was rural poor and the literacy rate was extremely low whilst your  home currency was a reserve currency, would you believe that was likely or even possible? If you were honest you would say no, of course not and chances are you wouldn't have done much differently.....if you were honest that is!

garbage. there is no way i would of watched the value of my money lose essentially half of its value. a few years of decline and i would of called it a day. that is just bad money management. period. 

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On 6/12/2020 at 11:11 AM, Misterwhisper said:

Every year? I'd say it's pretty much every week (if not twice weekly) that Bank of Thailand is moaning about the strengthening baht, yet nothing ever seems to be done to adjust it down. But I also believe that secretly they're quite happy about it, because it gives Thailand that oh so coveted face and image. 

Just for general consumption....BOT does actually take action on this subject but not many people see it, understand it or want to acknowledge it because it takes away an excuse to bash, for example:

 

"the Ministry of Finance (MOF) and the Bank of Thailand (BOT) decided to relax regulations to facilitate capital outflows to help promote capital flow balance and lessen pressure on the baht. Such relaxations include allowing exporters to keep foreign currency proceeds overseas, allowing retail investors to invest in foreign securities without going through a Thai intermediary institution and allowing businesses and individuals to transfer funds abroad more freely. These relaxations will be effective 8 November 2019,. 

 

- Exporters with proceeds below USD 200,000 per bill of lading will be allowed to keep the proceeds abroad, without a time limit (a relaxation from the current USD 50,000 threshold.)

 

- 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.

 

- Rules on foreign currency deposit (FCD) account held with onshore banks will be streamlined to provide flexibility in managing foreign currencies.

 

- Retail investors will be allowed to invest up to USD 200,000 per year in foreign securities, without having to invest via a Thai intermediary institution.

 

- Outward transfers, which are currently allowed based on a positive list of specific purposes, will now be allowed freely except for a few specific purposes (negative list), such as for settlement of FX/THB transactions with financial institutions abroad.

 

 Documentation will no longer need to be provided to commercial banks when conducting outward transfers of less than USD 200,000. This is an increase from the USD 50,000 threshold currently in place, to reduce the burden of providing documents and facilitate the ease of conducting foreign exchange transactions.

 

- Thai investors will be allowed to trade gold in foreign currencies (through FCD accounts opened with onshore commercial banks) with designated gold trading companies that have received approval from the BOT. Previously, such transactions could only be done in baht. This is to reduce the pressure on the Thai baht from gold-related transactions. Investors are able to keep foreign currency proceeds from gold investment in their FCD accounts, without having to exchange into baht for subsequent purchases. 

 

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

 

 

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