nordicman Posted February 26, 2007 Report Share Posted February 26, 2007 For the past couple of weeks the baht/US dollar exchange rate has had a daily fluctuation of more than 2 baht between roughly 35.3 and 33.2Link What is going on? A lot of money must be being made on the movement!! Link to comment Share on other sites More sharing options...
elef Posted February 26, 2007 Report Share Posted February 26, 2007 There are now 2 exchange rates, one onshore and one offshore. Bank of Thailand is selling baht to keep the exporters and tourists happy. Link to comment Share on other sites More sharing options...
Paillote Posted February 26, 2007 Report Share Posted February 26, 2007 I have noticed that as well. Every morning when I watch CNBC Asia I can see the exchsnge rate jump about two bahts to the dollar. Next morning it is all back again. Must be a gigantic tug of war between Bank of Thailand and another part. Wonder who that other part is. Probably loosing a lot of money in the process by buying the baht up all the time. Wonder who is gonna win... Paillote Link to comment Share on other sites More sharing options...
elef Posted February 27, 2007 Report Share Posted February 27, 2007 BoT is selling baht to keep it low, so a lot of foreign currencies are accumulated in the bank now - 60 billion dollars I think. If the baht get stronger the value of the foreign reserve is lower and BoT lose money. However to not inflate the thai economy BoT is issuing bonds at a higher interest than it can get on the foreign currencies. So it cost money to keep the baht low but the price is paid in Thailand. China is in the same position but of course much bigger with 1 trillion dollars in foreign reserve, at least 60 % in USD. Link to comment Share on other sites More sharing options...
Old Hippie Posted February 27, 2007 Report Share Posted February 27, 2007 So if/when the dollar really tanks, the Chinese government could lose big...or am I missing something...? And if BoT fucks this up, they could lose big also, and their economy could suffer...or am I missing something again? Link to comment Share on other sites More sharing options...
elef Posted February 27, 2007 Report Share Posted February 27, 2007 Yes, but that's not really important. If you have 10 million in your bank suddenly you may have 8 million. What's really important is to make the export easier with a low baht exchange rate, that way also still attracting tourists. I guess without intervention from BoT a dollar was around 30 now. Link to comment Share on other sites More sharing options...
Old Hippie Posted February 27, 2007 Report Share Posted February 27, 2007 Wasn't there a big stink about the Chinese governement keeping their currency low so as to increase exports...? Also, if BoT hadn't intervened, and the Bht gained against the dollar, the pound and the Euro, it would be fucked...and their economy could take a shit...? Also, how much of all this is the work of "Key Thais" manipulating stuff vs. reality? I know the US economy is shit, but is the Thai economy "really" "That" great? Also, a shift from the ptro dollar to the petro Euro could seriously fuck any/all holding US debt...so while many want the USA to collapse...doing so could have a very negative effect on the world economies...or would it just be a blip on minor importance? Link to comment Share on other sites More sharing options...
nordicman Posted February 28, 2007 Author Report Share Posted February 28, 2007 elef: you seem to know your stuff regarding fianances, however, something just doesn't "feel right" about that movement. Link to comment Share on other sites More sharing options...
elef Posted February 28, 2007 Report Share Posted February 28, 2007 Thailand has a strong economy but you're right, it's more a question of a weaker dollar. Link to comment Share on other sites More sharing options...
Denarius Posted February 28, 2007 Report Share Posted February 28, 2007 BoT is selling baht to keep it low, so a lot of foreign currencies are accumulated in the bank now - 60 billion dollars I think. If the baht get stronger the value of the foreign reserve is lower and BoT lose money. However to not inflate the thai economy BoT is issuing bonds at a higher interest than it can get on the foreign currencies. So it cost money to keep the baht low but the price is paid in Thailand. China is in the same position but of course much bigger with 1 trillion dollars in foreign reserve, at least 60 % in USD. Wasn't the latest BoT bond coupon rate 4.625%? That is less than they could get in the USA (5.25%). Don't follow what you are saying there. Take a look at Japan for example. Japan kept its interest rates at 0% (or close to it) for a long time, which kept the yen low. Raising interest rates should, all things being equal, cause the currency to be more valuable. And that is happening now in Japan. Since it has increased the interest rate to 0.5% the value of the yen has, with some struggle, increased. I think it has more to do with whether or not the market believes what Japan is saying about gradually increasing the rate to 1%. If the Bank of Thailand can get foreigners to buy its bonds (like the USA does) this can delay inflation. Raising interest rates can help with this. Link to comment Share on other sites More sharing options...
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