The baht sliding

[Torneyboy]

Sydney is buying THB notes at around 34 and selling at around 27.

In BKK in March we bought THB ..at super rich (behind BKK bank) and got 31 for one AUD.

 

My first trip in march 97... i got 16 to my dollar..in May the same year i got 19THB to the OZ dollar...

[khunsanuk]

Hi,

 

"NEVER take baht with you overseas."

 

Certainly won't anymore

 

Sanuk!

[..]

I think it is endemic of a trend that Asian banks are thinking of divesting US$. Asian Central Banks Currently own ~$1.1 trillion in US debt, making them the largest US creditors. However, these banks appear to be growing tired of this role. Starting with China then followed by Japan and South Korea, all three central banks have publicly stated they will start to move away from their position as US creditors, meaning they would purchase fewer US Treasury bonds. Next, all three also retracted this statement within 24 hours. However, according to Treasury International Capital data, all three are now purchasing far fewer US Treasuries than before. In other words, the data indicates the first statement from these banks was in fact their actual policy while the second statement was merely to prevent a selling panic in the market.

 

Next, Asian banks formed the Bellagio Group, a group consisting of all the major Asian central banks (love the name since I associate it with Las Vegas; who says Asians have no sense of irony). Considering the growing interdependence of Asian economies, this group seems to be a natural step in the process of furthering regional interdependence. However, China, Japan and South Korea are all members. This indicates the group's covert purpose may be to figure out a way to extricate themselves from the position of US creditors.

 

Now there is news of the central banks increasing the size of their currency swap agreements. Dow Jones (no link, pay site) reported: "The Bank of Korea on Friday signed local-currency swap agreements worth the equivalent of $3 billion with the Bank of Japan and $4 billion with the People's Bank of China as part of a planned expansion of ties between Asian central banks.

 

The signing ceremony comes after finance ministers from South Korea, Japan and China agreed at a meeting of Asean+3 nations in Istanbul earlier this month to expand existing currency swap agreements, the South Korean central bank said in a statement.

 

Under the agreement between the BOK and the BOJ, the two central banks may draw from the other's won or yen funds when there is a short-term liquidity crunch under normal circumstances to achieve financial stability.

 

The BOK and BOJ already have a dollar-denominated currency swap agreement in place. That agreement was first signed in 1999 and was increased in size to $7 billion from $5 billion in 2001."

 

These countries are in a very difficult situation. If they move to sell US Treasuries they could incite a selling panic. This would lower the value of the US dollar on the currency markets. A lower dollar would in turn lower the value of each central banks respective capital base. This could seriously hamper each bank's ability to control interest rate and monetary policy within their respective countries. In other words, selling Treasuries would akin to throwing a boulder into a pond with massive ripples occurring as a result.

 

One way to stem the effect of these ripples is to have sufficient capital available to inject into the banking system to ease public panic. This is where the currency swaps come in. By having access to sufficient foreign credit, each central bank has the ability to calm its own internal market, easing panic and maintaining financial stability.

 

I think it is highly improbable that the Asian banks really have any idea what they will do regarding their exposure to US debt. It's just as likely they will maintain their current position of US Treasury bonds as they will sell them. However, the banks are moving in the direction of creating the option of selling their US Treasury assets. Their slow moves are entirely consistent with Asian (not just Thai) philosophy. They are making slow and deliberate moves. Jai yen yen, so to speak.

 

For them, this is a win-win scenario. If they never use the credit, they still have closer ties with neighboring economies (possibly a step towards an Asian currency ala the Euro). Should they want to sell, they have the credit. It's really a no brainer.

 

Cheers,

SD

 

PS - The links above on Belliagio and Dow Jones (search the site, but ya gotta pay) really covers this much better than the summary I gave, if you are interested in this stuff.

[gummigut]

EU Constitution vote.

 

<<burp>>

[spudsmck]

I've been following it just about everyday for the last 2 months and the dollar is going up. It's now just a little bit over 40 baht per $1.00

 

 

Just in time....because I'm off on Trip #19 in 9 days

[OCgringo]

the US$ - Euro rate today was 1.23 ,

the best for the US$ in months thanks to the French, we will see what happens when he Dutch vote !

 

this reflects on the US$ - Baht rate too

[..]

Rate at the Phrom Phong BTS station was 40.28 yeaterday.

[elef]

Some analysis based on fundamentals forecast a drop for the dollar of 20 % compared with other OECD currencies. The baht and other 3rd world currencies will probably follow the dollar down they say.

 

The nos in France and Holland are expected by the market and no long-time effect is expected for the euro.

 

I don't believe in forecasts....

[OCgringo]

Expected ? then why did it go down 7 cents in a week ?. 1.23 today

 

I still do not belive the US$ will go down 20% off its low ,

and I have lots invested in Euros, if it would go back to 1.35 I would get out of euros,

 

THe big question is China and what it can do to both the US$ and Euro when (if) it revalues its money

[elef]

That's the reason I don't believe in forecasts. However I watched an interview with Greenspan and it's clear he wants the dollar down.