TheBelgianDog Posted March 28, 2007 Report Share Posted March 28, 2007 Does someone have an idea how the exchange shops get a profit margin? Do they benefit from a special rate from the BOT? I guess that they do not sell a lot of foreign currencies so how do they get profits with all the foreign currencies they buy? Maybe stupid question but would be curious to know the answer Link to comment Share on other sites More sharing options...
junglesoup Posted March 28, 2007 Report Share Posted March 28, 2007 It is based on a credit rating amongst banks, credit unions etc. The rate you see is not the true interbank rate. The big institutions buy and sell over the reuters or EBS(electronic brokerage service) platforms. The bigger banks with better credit ratings amongst each other determine the rate. You will notice that there is always a spread between the "bid" and "ask" price. In the direct market there is no spread, although there will be a commission. The rate that these retail forex market makers give is an artificial market. Its not the true market. They make the money on the spread. If look at it like a foodchain the money exchanges and local bank branches are at the bottom of the foodchain. You could call them bucket shops. There is no centralised market in forex meaning if you shop around you can usually find a better deal. for example if I want to buy pound against dollar there will be a spread between buy and sell price. sell=1.9500 buy= 1.9504 Here is a 4 point spread. In the true market there is no spread. This spread is created so that they can gain the difference in the spread. This 4 point spread is what you get from a retail forex outlet, but the spread is even worse in exchange booths. In the Uk, thats what makes me laugh at these travel agents who advertise "commission free" exchange. What they dont tell you is that they give a shit conversion rate. In my direct access account I can get dollar at this moment at 1 pound=1.9636. If I go to the bank or a travel agent I will be getting 1.8800 or worse. 10% different. Its robbery. Give me a commission any day over this. In the direct market, you will get true market price and will have to pay $4.60 per round turn, ie to buy and sell. If you just need to buy it will be half this, or if you just need to sell it will be the same. No one should ever use these agents unless you want to lose quite a few percent from the real market price. This is importants when it comes to transfering larger amounts. Link to comment Share on other sites More sharing options...
elef Posted March 28, 2007 Report Share Posted March 28, 2007 The exchange shops outside the banks have a different business idea today's cash rates from Bangkok Bank SEK Sweden 4.79 5.05 So if want to sell 100 SEK I get 479 baht, if I go to my normal shops in Pattaya I'll get (4.79+5.05)/2= 4.92, or 492 baht In Thailand stay a lot of illegal guest workers, government says 2 million, more well-informed guess the double. These workers can't use the bank system for sending money to their families. They can't even buy SEK in the bank for 5.05, what they pay I don't know but it's a lot more. So the exchange shops make a lot of money... Link to comment Share on other sites More sharing options...
torrenova Posted March 28, 2007 Report Share Posted March 28, 2007 Why on earth would an illegal worker want to buy SEK ? Do you really think there are massive numbers of illegal Swedish workers in LOS ? Surely illegal workers would receive THB ? or perhaps USD. Both are easily converted in nearby countries where I suspect most illegals come from. In fact, if you go to buy SEK or even USD, you will find many places do not want to take THB for foreign currency. Link to comment Share on other sites More sharing options...
elef Posted March 28, 2007 Report Share Posted March 28, 2007 Just a very small part is SEK, but the illegal workers buy any western currency but avoid dollars now (before #1). Euro is the most popular one, GBP #2, USD #3, followed by canadian, aussie, danish and swedish currencies all from a very good source. Link to comment Share on other sites More sharing options...
torrenova Posted March 28, 2007 Report Share Posted March 28, 2007 And which illegal workers are these ? Not the Burmese who earn the mighty sum of Bt1000 per month after provision of food and accommodation. These people couldn't buy anything. Who are these people buying hard currency at way over the market rate ? Link to comment Share on other sites More sharing options...
elef Posted March 28, 2007 Report Share Posted March 28, 2007 Why they don't send THB to home countries is a good question and it started long time before the dual exchange rates so thats's not the explanation. Probably afraid of banks asking questions, I don't know. Maybe they save and bring back later and are afraid of a weakening baht. Maybe it's easier to change western money in exchange booths??? :grin: Link to comment Share on other sites More sharing options...
elef Posted March 28, 2007 Report Share Posted March 28, 2007 Burmese maids make 3000 baht per month, free food and room. There're constructions workers from various countries around Thailand making 5-8000 baht per month but must pay for food and room. Factory workers make with overtime 8-12000 baht if qualified. Link to comment Share on other sites More sharing options...
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