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[Gonzo the Face]

Neither the USA nor Thailand is in any state  upheaval..... so what is causing the baht to be so strong and getting stronger daily , against the dollar.

Who is playing games ......  it has dropped nearly 70 satang in a week.  This morning it is 31.35 !!

Who is playing Mickey Mouse with the exchange??

Gonzo

Edited by Gonzo the Face, 2010-08-18 09:19:49.

[DangerousDavies]

I think it's to do with balance of payments and trade. If you sell more than you buy your currency is stronger.
No good having a "strong" currency if it's all going overseas to pay for imports.

[Gonzo the Face]

DangerousDavies, on 2010-08-18 09:22:28, said:

I think it's to do with balance of payments and trade. If you sell more than you buy your currency is stronger.
No good having a "strong" currency if it's all going overseas to pay for imports.

How does that compute, then, as Exporters in Thailand are screaming that the strong baht is hindering their exporting?

[cloudhopper]

Gonzo the Face, on 2010-08-18 09:45:26, said:

DangerousDavies, on 2010-08-18 09:22:28, said:

I think it's to do with balance of payments and trade. If you sell more than you buy your currency is stronger.
No good having a "strong" currency if it's all going overseas to pay for imports.

How does that compute, then, as Exporters in Thailand are screaming that the strong baht is hindering their exporting?

Every exporter in every country of the world wants their currency weaker than all the others. Mathematically impossible for everyone to get their wish however some have more influence than others. Or to answer your question in your OP - everyone is playing games. In this game though the most clever players will end up being the biggest losers IMO.

[Lancelot]

Gonzo the Face, on 2010-08-18 09:45:26, said:

DangerousDavies, on 2010-08-18 09:22:28, said:

I think it's to do with balance of payments and trade. If you sell more than you buy your currency is stronger.
No good having a "strong" currency if it's all going overseas to pay for imports.

How does that compute, then, as Exporters in Thailand are screaming that the strong baht is hindering their exporting?

Exporters in every country will always scream about their respective countries "strong currency."

A strong baht makes oil -which Thailand imports-much cheaper. I also suspect that while the US Government talks up a Strong Dollar, they actually are not that upset with a weaker currency to make exports more competative and reduce the massive trade deficet

[Abrak]

Gonzo the Face, on 2010-08-18 09:45:26, said:

How does that compute, then, as Exporters in Thailand are screaming that the strong baht is hindering their exporting?

Well I believe everyone screams life is unfair. But in June Thai exports I believe were up 47% year on year so it doesnt seem they are suffering unduly.

In reality the baht hasnt been that volatile or appreciated that much. It hasnt moved a lot from its highs 3 or 4 years ago against either the US$ or on a trade weighted basis. The BoT is largely constrained from intervening because of their large short position.

[Gonzo the Face]

Abrak, on 2010-08-18 10:15:27, said:

Gonzo the Face, on 2010-08-18 09:45:26, said:

How does that compute, then, as Exporters in Thailand are screaming that the strong baht is hindering their exporting?

Well I believe everyone screams life is unfair. But in June Thai exports I believe were up 47% year on year so it doesnt seem they are suffering unduly.

In reality the baht hasnt been that volatile or appreciated that much. It hasnt moved a lot from its highs 3 or 4 years ago against either the US$ or on a trade weighted basis. The BoT is largely constrained from intervening because of their large short position.

hahahahaha

Forgive me for straying, but would you be happy if your significant other said " you had a large short position "

[Lancelot]

And, from browsing the papers, I often see reports of investment money pouring into Thailand. Usually a stong (positive) balance of trade and investment inflows will tend to push up a countries currency. Supply and demand

[Abrak]

Lancelot, on 2010-08-18 10:35:51, said:

And, from browsing the papers, I often see reports of investment money pouring into Thailand. Usually a stong (positive) balance of trade and investment inflows will tend to push up a countries currency. Supply and demand

That would certainly seem to make sense.

So given that forex reserves (inc net forward) were US$118bn at the end of 2008 and 20 months later they are US$164bn, it probably wouldnt surprise you that the currency has appreciated. Of course US$50bn doesnt really go that far in the real world nowadays but it is close to 20% of Thai GDP.

[AnnyLing]

Abrak, on 2010-08-18 10:15:27, said:

Gonzo the Face, on 2010-08-18 09:45:26, said:

How does that compute, then, as Exporters in Thailand are screaming that the strong baht is hindering their exporting?

Well I believe everyone screams life is unfair. But in June Thai exports I believe were up 47% year on year so it doesnt seem they are suffering unduly.

In reality the baht hasnt been that volatile or appreciated that much. It hasnt moved a lot from its highs 3 or 4 years ago against either the US$ or on a trade weighted basis. The BoT is largely constrained from intervening because of their large short position.

Exactly four years ago one Dollar bought 37.50 Baht. Today one Dollar buys 31.50. That is not "a lot" ?

[Gonzo the Face]

AnnyLing, on 2010-08-18 15:18:32, said:

Abrak, on 2010-08-18 10:15:27, said:

Gonzo the Face, on 2010-08-18 09:45:26, said:

How does that compute, then, as Exporters in Thailand are screaming that the strong baht is hindering their exporting?

Well I believe everyone screams life is unfair. But in June Thai exports I believe were up 47% year on year so it doesnt seem they are suffering unduly.

In reality the baht hasnt been that volatile or appreciated that much. It hasnt moved a lot from its highs 3 or 4 years ago against either the US$ or on a trade weighted basis. The BoT is largely constrained from intervening because of their large short position.

Exactly four years ago one Dollar bought 37.50 Baht. Today one Dollar buys 31.50. That is not "a lot" ?

Lot or not is each mans call...... to me it is quite a bit....and more than I would like to see.

[Abrak]

AnnyLing, on 2010-08-18 15:18:32, said:

Exactly four years ago one Dollar bought 37.50 Baht. Today one Dollar buys 31.50. That is not "a lot" ?

Well its 5% per annum. Both the Euro and GBP have been much more volatile. It really is highly optimistic to expect a country with very high trade surpluses and a very manageable fiscal deficit to not show some appreciation against a country with very large deficits and which has just been through a major financial crisis and the crippling of their banking system.

Given all the structural problems in the US and the relative strength and stability of the Thai economy, I would say its appreciation has been pretty modest.

[Buckeye911]

AnnyLing, on 2010-08-18 15:18:32, said:

Abrak, on 2010-08-18 10:15:27, said:

Gonzo the Face, on 2010-08-18 09:45:26, said:

How does that compute, then, as Exporters in Thailand are screaming that the strong baht is hindering their exporting?

Well I believe everyone screams life is unfair. But in June Thai exports I believe were up 47% year on year so it doesnt seem they are suffering unduly.

In reality the baht hasnt been that volatile or appreciated that much. It hasnt moved a lot from its highs 3 or 4 years ago against either the US$ or on a trade weighted basis. The BoT is largely constrained from intervening because of their large short position.

Exactly four years ago one Dollar bought 37.50 Baht. Today one Dollar buys 31.50. That is not "a lot" ?

Agreed, it's freaking HUGE if you ask me.  I seem to recall a US$ at a little under 43 baht in 2005.  Check out the ten year slide for the US$ on this link.  
http://www.tititudor..._baht_nyfed.htm

[Abrak]

Buckeye911, on 2010-08-18 15:46:33, said:

Agreed, it's freaking HUGE if you ask me.  I seem to recall a US$ at a little under 43 baht in 2005.  Check out the ten year slide for the US$ on this link.  
http://www.tititudor..._baht_nyfed.htm

Well I remember a time that the baht was trading at BHT25:US$1. The Thai economy over heated, it was running a 6% C/A deficit, debt as a percent of GDP was 160% and there was a 3% fiscal deficit. These massive imbalances led to a financial economic and currency collapse with the baht halving in 6 months.

10 years later another economy had just seen property prices double, debt as a percent of GDP reach 350%, twin deficits of well over 10%, a pegged currency to China that was hollowing out its manufacturing. Greedy useless bankers making stupid products and stupid loans. It too collapsed but not much cos they simply kept on borrowing more. Their currency hardly shifted.

So obviously I am rather perplexed why the baht isnt around 25. They learnt and got over their problems, resolved their bank assets and are growing nicely. It really is hard to accept the devaluation of their currency when they clearly didnt screw up as badly.

I am not altogether serious - I have no serious view on the baht:US$ rate but on fundamentals it is far easier to make an argument that the baht should further appreciate rather than it should fall.

Edited by Abrak, 2010-08-18 16:08:22.

[Lancelot]

Gonzo the Face, on 2010-08-18 15:32:24, said:

Lot or not is each mans call...... to me it is quite a bit....and more than I would like to see.

I agree. Most returning tourists would not forego buying a B30 dish of pork fried rice because "Back in 20xx a B30 meal cost me $0.75 cents USD; now its -gasp- $1.00! Send it back please

However, if we measure our wealth against a basket (albeit a big basket) of goods here in Thailand, say a nice condo, car or other big ticket items, the consumer described abouve would be out a cool ten million baht... (One Million $USD with exchange rates of B40/USD vs. B30)

[Abrak]

Lancelot, on 2010-08-18 16:06:43, said:

However, if we measure our wealth against a basket (albeit a big basket) of goods here in Thailand, say a nice condo, car or other big ticket items, the consumer described above would be out a cool ten million baht... (One Million $USD with exchange rates of B40/USD vs. B30)

Well I am not so sure on property prices as they really havent movent much over the last 20 years in US$ terms, while US property, even given the fall, has done pretty well. And the stock market is half what is was at the beginning of 1994.

And remember the Euro fell 15% against the dollar in about 4 months from the end of November.

Actually the baht US$ rate was Bt31.5 two years ago and since then the US economy and financial system has totally imploded, its fiscal deficit is a joke, unemployment has turned from cyclical to a structural problem. Everyone is broke overleveraged depressed and increasing dependent on an irresponsible and overstretched Government. I will not pretend Thailand is the greatest economy in the world but the bar for appreciation is pretty low. For 5 years a very modest appreciation of the baht is met by complaints by TV members. But never has anyone come up with any sensible fundamental reason why this appreciation is not justified.

And to be honest if I look at the fundamentals of both countries I would probably expect a 20% further appreciation of the baht over the next 5 years. It may or may not happen but I find it hard to think that someone might justify a 20% appreciation of the US$ against the baht on any fundamental basis.

Edited by Abrak, 2010-08-18 16:44:07.

[NamF0n]

^^^^
Would having a very low educated workforce with a worse then dreadful education system, and many major companies/employers in Thailand owned by foreigners, thus profits dont stay in the country be 2 fundamental facts as to why the baht shouldnt be looking too rosy.

Or are these 2 reasons why the economy is doing ok i.e. foreign companies investing and nonunionised cheap dumb labour?

[AnnyLing]

For 5 years a very modest appreciation of the baht is met by complaints by TV members.
*****
Modest ??? From 42.50 to 31.50 is modest ? Do you think an American retiree whos 2,000 Dollar income buys now 63,000 Baht istead of 85,000 Baht considers this as very modest ?

[Abrak]

NamF0n, on 2010-08-18 16:45:58, said:

^^^^
Would having a very low educated workforce with a worse then dreadful education system, and many major companies/employers in Thailand owned by foreigners, thus profits dont stay in the country be 2 fundamental facts as to why the baht shouldnt be looking too rosy.

Or are these 2 reasons why the economy is doing ok i.e. foreign companies investing and nonunionised cheap dumb labour?

Well fundamentals are more like....
C/A surplus
Fiscal surplus/deficit
competitiveness
Growth
Inflation

Thailand does not really compete in manufacturing with the US where salaries are 5x higher. It has gained competitiveness over China which now has higher wage rates because of inherent inflation and a debt driven growth strategy.

Thai manufacturing workers are not well educated but they tend to be fairly diligent and the economy is open with no capital controls. Profits by foreign investors are generally reinvested, there has been a consistent surplus on the capital account over the last ten years.

One of the problems the US has is that say a decent proportion of their workforce are also badly educated and have few skills. It will be difficult for them to compete.

If you look around the world there are very few countries with combined twin surpluses, I do not believe any economist thinks that the baht is overvalued on a PPP basis. The fact that many of the top employers are foreign like Seagate and Toyota clearly shows they believe the underlying economy is both competitive and open.

There are many very well educated Thais such as the PM and FM. I am not really convinced that the majority of jobs actually require much intelligence but then I was a banker.

[AnnyLing]

thus profits dont stay in the country be 2 fundamental facts as to why the baht shouldnt be looking too rosy.
*****
Five years of whishful thinking. It does not stop and might go on for another five years.

[Abrak]

AnnyLing, on 2010-08-18 17:03:31, said:

For 5 years a very modest appreciation of the baht is met by complaints by TV members.
*****
Modest ??? From 42.50 to 31.50 is modest ? Do you think an American retiree whos 2,000 Dollar income buys now 63,000 Baht istead of 85,000 Baht considers this as very modest ?

People who come to Thailand because their dollar income goes further should not really be surprised when it doesnt.

The concept that the baht will remain undervalued against the US dollar forever is highly optimistic.

Edited by Abrak, 2010-08-18 17:18:50.

[Abrak]

BTW I do think people are pretty snobby about the Thai under educated work force. I have a husband and wife maid's team - they are not well educated, dont speak english but they are honest, intelligent, work hard and are diligent. Now of course they are not that productive working for me but there is no doubt they could be. Look at how many people man gates, guard stores, drive farangs around. There are plenty of jobs for the uneducated at low wages and productivity potential from others. I really wonder what is going to happen to the underclass in the West. Embittered, uneducated, ill-treated and increasingly marginalised.

[NamF0n]

^^^^
Theyll be waiting for the dollar to lose further value against Asian currencies so manufacturing will return.

[cloudhopper]

Abrak, on 2010-08-18 16:05:08, said:

So obviously I am rather perplexed why the baht isnt around 25.

I agree completely and would not be at all surprised to see it around there sometime next year.

[Abrak]

cloudhopper, on 2010-08-18 18:31:35, said:

Abrak, on 2010-08-18 16:05:08, said:

So obviously I am rather perplexed why the baht isnt around 25.

I agree completely and would not be at all surprised to see it around there sometime next year.

If you were to strictly compare to the US$ I would agree but essentially the baht is pegged to the Yuan. The Chinese economy has got a little messy so I dont think they are going to revalue much which will help maintain a lower value of the baht. At some point though the economy needs to prepare for the day it is no longer undervalued.

But your point is well taken, even at Bt25 I feel it would be difficult to argue that the baht is overvalued against the US$.