Calls grow louder for action on baht

[LizardKing]

So where is this crash so many said would happen ala 1997? Is the Bht backed up, inflated for national pride? or is it really that strong? I have read business is pulling out, seeking cheaper labor and safer/more stable governments...so which is it? backed up? or just a strong self sufficent currency? I know th USD sucks, so does the Euro and the Pound etc...why is Thailand doing so well...?

Uh dude, it is right there in the article: "Capital inflows to the bond market have totalled $3 billion so far this year, in addition to nearly $600 million into the SET."

 

All that foreign money must be exchanged into baht before the other transaction is made. Simple supply & demand. There is a huge demand for baht right now because of institutional investors with deep pockets (read that, China, India, maybe Japan) are buying Thai financial instruments. Nothing nefarious, they just think LoS is undervalued, both the bond & share markets, so are buying.

 

Tourism and rice exports have pretty much zero to do with it.

[kamui]

Thailand baht is not a free floating currency, since 1997. They use a formula, to keep the baht stable.

 

The formula, for the baht, is heavily weighted to the value of the YEN and $USD. So, the YEN, being a bit out of historical ranges, is a lot of the reason. When the YEN changes, Japanese Government intervention, has been talked about for many months, so will the baht. Will the Japanese Government do anything, who knows.

 

The Japanese government is failing since 13 years to strengthen their economy. They have a deflation since a long time while the YEN is too strong. All their efforts to weaken the YEN are half hearted and don't change anything.

 

Therefore, if the THB is strongly connected to the YEN the THB won't go down in the near future.

 

 

[Sporty]

Japan Plans Intervention to Stem Rise in the Yen

By HIROKO TABUCHI

Published: September 10, 2010

 

TOKYO  The Japanese government is gearing up to intervene in global currency markets to curb a strengthening yen, Prime Minister Naoto Kan said Friday, signaling an effort to limit further damage to Japan’s export-led economy.

 

(More) http://www.nytimes.com/2010/09/11/business/global/11yen.html?src=busln

 

[color:red]One Analyst, expected it by the end of next week, but I heard that before, too. Japanese Government Spokesman have said in the past few months, they like to see a 105/110 exchange, will they do it all at onces, again who knows.[/color]

[kamui]

Japan Plans Intervention to Stem Rise in the Yen

By HIROKO TABUCHI

Published: September 10, 2010

 

TOKYO  The Japanese government is gearing up to intervene in global currency markets to curb a strengthening yen, Prime Minister Naoto Kan said Friday, signaling an effort to limit further damage to Japan’s export-led economy.

 

(More) http://www.nytimes.com/2010/09/11/business/global/11yen.html?src=busln

 

[color:red]One Analyst, expected it by the end of next week, but I heard that before, too.[/color]

 

Forget it. IMHO

 

[Old Hippie]

So where is this crash so many said would happen ala 1997? Is the Bht backed up' date=' inflated for national pride? or is it really that strong? I have read business is pulling out, seeking cheaper labor and safer/more stable governments...so which is it? backed up? or just a strong self sufficent currency? I know th USD sucks, so does the Euro and the Pound etc...why is Thailand doing so well...?[/quote']

Uh dude, it is right there in the article: "Capital inflows to the bond market have totalled $3 billion so far this year, in addition to nearly $600 million into the SET."

 

All that foreign money must be exchanged into baht before the other transaction is made. Simple supply & demand. There is a huge demand for baht right now because of institutional investors with deep pockets (read that, China, India, maybe Japan) are buying Thai financial instruments. Nothing nefarious, they just think LoS is undervalued, both the bond & share markets, so are buying.

 

Tourism and rice exports have pretty much zero to do with it.

 

 

 

All the above goes back to what I said before, in other posts about economic theory...and again we can ask...why is the Bhat so strong? will it dip...? Will the USD$ recover? of course we will get several conflicting theories from experts...

[Nervous God]

Seems most here forget historically the baht isn;t 30+ to the dollor, it was for a long time at well under 25 to the $.

 

 

[LizardKing]

OH, let me try this again, as you seem to be missing the point.

 

At this point the baht is a simple commodity -- finite supply and high demand equals higher prices -- and will dip when the demand drops. Big investors are looking to park their money. The like what they see in the Thailand bond & share market. So they are in effect buying a lot of baht right now to use to invest in those markets (all those financial instrument things are sold in baht, not $$ or quid or yen or RMB).

 

Look at it like buying a cuppa Joe in Narita airport. Most shops there only take yen (the why nor the logic is immaterial; it just is what it is). So you can either exchange your money and buy your coffee, or not. What you cannot do is give the shop your dollars in exchange for the coffee.

 

Yes, Thailand could print more money to increase the supply and lower the cost. But then they risk running off the investors, which would start a deflationary spiral. It is a tough call and I am not an economist enough to weigh it all out, but obviously those in the know feel the hit on exports is worth the influx of capital right now.

[Old Hippie]

Yes, apparently, I am missing the "point." But so have all the "experts" who kept saying the Crash of the Bhat was eminent.

 

My first trip in 1986 I think the exchange was 25/1? don't remember...over all it was still a "cheap place" to go...

 

SOme claim jobs and money is leaving, you and others point out it is staying...all I am asking is, who is "really right?"

 

If I read it right a few months back, Ford and a few others are settling into Thailand so it would seem you have it right. So why so many keep calling for a correction or crash?

 

Like anything economic, it is all a best guess. I;ll trust your judgment in the mean time.

[LizardKing]

Well, it is all about following the money. Those who are calling for a correction are those who are hurt by it: the tourism & export industries. The financial "gurus" at the Finance Ministry have made the choice to go the other way for whatever reasons they have. I can see some of them (wanting as much cash as possible during a poor economy, for instance), but they have to be careful not to go too far and really damage the export sector; that's not really much a worry in the tourism sector as history has shown (people just keep coming no matter what happens). Despite the high baht hurting me personally, I'd say they are doing a pretty damn good job managing the economy at the moment.

 

Look at it like the US: we all think the economy sucks & Bush was a mess. But those at the top are very happy & their incomes increased substantially over the past 10 years. It is just who's point of view you look at. This baht issue is the same thing.

[Central Scrutinizer]

"Those who are calling for a correction are those who are hurt by it: the tourism & export industries."

 

True. One side always has it worse than the other. A balance is tough it seems to keep both importers and exporters happy. Too high an exchange with the baht and the exporters can't sell, too low and the importers pay a lot more to buy. A balance needed. Always seems to be one side whinging at the government to fix the rate in their favor.

 

Also, the baht was for many years at 25 to the dollar. After 97 it hung around 40/38 to the buck for years. The past four years or more it has gradually been readjusting to pre-crisis levels. Doesn't help that both Bush, and now Obama, have wanted the dollar low to supposedly help American exporters. I remember Bush bleating on about this, and recently heard Obama state he wanted a weak dollar too. Beats me what the hell we actually export any more really. Who a low dollar helps/benefits is a puzzle to me. As a consumer society I'd think it best to have a strong stable dollar on the whole for the country.