Educated guesses? Rampant rumors. Who knows. The point is I think the Baht has to move. There are some rumors floating around that depreciating the Baht is actually one of the ideas the current government is proposing as a fix to the economy. The only reason they are waiting is to give the rich people some time to move their Baht out before they do it.
Think about it. Helps the export market, encourages tourism and boosts the loan packages for the coming infrastructure projects. It is also one of the most dramatic moves the new government could make that truly moves the needle in short order.
Possible? Vietnam is doing it, Russia is doing it and the UK essentially did it so why not Thailand?
I know there are finance guys who read the blog - so chime in and lay down some opinions.
The next few months should be interesting.
To help us all keep track of it I have started a poll to capture what people think. Right now the Baht is about 34.9 to the dollar. Been sliding again over the past few days. I think it will keep moving.
What do you think?
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I think the people who clicked “38″ in the poll are kidding themselves. I clicked 35.
The pound at 50 is killing tourism much more than the dollar at 35. America is, last time I checked, about #8 on the list of top countires visiting Thailand. The UK is the #1 western country. And the pound has its own probelms.
Yes, an outright devalluationw would solve that and send planeloads of tourists here again (oh, I wish…) but the side effects of a devaluation would be much worse. One only has to look back to 97 when the markets did the devaluation for the government.
- Mass panic among Thais. Thais went through Pattaya, marching into farnag businesses ordering them to take on Thai “managers” and if they didn’t, their buildings were vandalized.
- Knee jerk price increases. Price increases far outstripped the actual devaluation. The 500 baht long became 1500 overnight.
- More foreign investors pulling out.
I’ll stop there, as I’m wading too far out into the economic pool, but I think devaluation falls under the category of “careful what you wish for.”
View all comments by Pattaya Ghost
Friend of mine got £100 for Xmas in Thai baht from his sister
A tonne got him 4200baht.
That DIDNT include any vaseline
View all comments by Young Penfold
I voted for 36 for the simple reason that the Baht is about 34 to the $ now. If it drops at all, the Bank of Thailand will try to arrest its fall by any means necessary. I predict a 1 Baht per month fall against the $, so were looking at 35 in January and 36 by February.
If it DOES hit 40 to 50 Baht to the $ sometime in the future, it may partially trigger a massive collapse of the Baht against foreign currency. Folks around the world realize that the Baht will go down no matter what tricks the BoT pull. In fact, if the BoT is using legally and morally dubious methods of propping up the economy, the downslide will only accelerate should that sort of thing be reported.
If the BoT runs its affairs at the national level the same way local and regional folks there run things at their respective levels, such a downslide would be inevitable.
That’s my 2 cents and I’m sticking to it.
Oh, and happy holidays.
View all comments by Debt Star
Ah, a topic on which I have some technical knowledge. According to the people who have opinions I trust, we’re in about the second inning of the WWKK (for you European football types that’s probably the 20th minute). We still have a UK housing bubble to deflate, some ugly currency issues to deal with in Eastern Europe, and a whole closet of other shoes to drop.
Asian economies, like it or not, live largely be manufacturing stuff that is sold mostly in developed Europe and the US. A weaker baht would make Thailand a more attractive place to buy stuff from, but it looks like it will still be a fight for a bigger slice of a pie that is currently shrinking. Not good for anyone.
My understanding is that the Thai banking system is surprisingly well capitalized, with the Thais still remembering the dark days of ‘97 when their currency was attacked by notable gentle liberal George Soros, among others. This means the government should have at least some control over where the baht floats.
That said, none of this matters at all until credit markets thaw out. The stories are all about stocks and oil and company earnings but if you want to keep you eye on the ball read about what’s happening in the world of debt. Three month t-bills yield essentially nothing, there is simply so much fear about credit. It’s not nearly as sexy but it’s where the really staggering events are taking place right now.
Remember less than a year ago when we were worried that China and India were going to burn so much oil it would be $200/bbl? Seems like a great problem to have now.
If I get a bonus I’ll be testing the baht in Feb.
View all comments by Tosh
It’s my understanding that the Baht is tied to a basket of currencies and doesn’t really float free. In 1997, the Baht was overpriced due to wild real estate speculation and an overlevegerd currenty market, and so it crashed. Not due to Soros, he just saw the problems coming.
The Baht will not change much in the near future, since the international monetary crisis is rooted in exotic investment schemes and indisciplened credit markets, which now bother the West, not Thailand.
View all comments by FriskoDude
@FriskoDude - Unfortunately, we are no longer dealing with an international monetary problem, we’re dealing with a global recession. That most assuredly will impact Thailand.
The Soros thing is just a knee jerk reaction. All of my lefty friends seem to think the guy is a saint, I like to remind them he made a lot of his money blowing up third world countries. Since he made money he was on the right side of the trade, but a fair number of people probably starved because of those admittedly correct bets.
View all comments by Tosh
While you Americans and Brits/Europeans discuss what is happening with the baht, spare a thought for us Aussies.
In the last six months the Aussie dollar has gone from almost parity with $us to now be trading between 60 and 70 cents. The baht appears to be directly linked to the $US - because in the same time our exchange rate has gone from about 33 to the $A to at times 21.
I know this has affected my travel plans to LOS, and only that I had a trip pre-booked in November I doubt I, and the three blokes I travelled with would have gone.
Although I do not know what percentage of visitors to Thailand are Australian, I doubt anywhere as many will make the trip with these exchange rates.
Any future trips to LOS are definitely on hold. I will still be travelling, bit to destinations that provide better value.
View all comments by dingoh
http://finance.yahoo.com/echarts?s=THB=X#chart17:symbol=thb=x;range=2y;indicator=psar+bollinger+volume+macd;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
yahoo.com has these fun little graphs you can play with. There’s lots of technical indicators you can throw on top of the graph and scroll in and out. But after having done that pseudo-analysis I still can’t really say if the baht is just did a small little head-fake and then now it’s bouncing back up to stay on the long-term trend or if maybe it’s going to make a big jump soon. I agree that it depends on some external factor. And nobody can say when that might be. But in retrospect it will have been so obvious.
If you’re bored, watch this graph every couple days for next two months and maybe you’ll see the day where the big jump (if there is one) started to happen and recognize it.
View all comments by naturalgame
@dingoh:
the baht is loosely pegged to the dollar, though i can’t explain how that works
@tosh:
i think it behooves us to remember that much of the financial crisis (if not the main catalyst for the disaster) was caused by incestuous corrupt unscrupulous Thai politicians and elites.
Chief among them was PAD leader Sonthi and Thaksin, who at the time were still partners in crime: they managed to have many of their buddies, with paper-thin credentials but yellow-pages-thick hiso connections appointed to top positions in government financial agencies and banks (like Krasikorn, for example).
They then proceeded to loan all their crooked cronies money which they may have known could never be repaid, in a virtual blank-check run on the nation’s coffers.
When Sondhi declared bankruptcy soonafter, the courts (which never seem to find the backbone to punish his misdeeeds) required him to pay only a tiny share of his debts, leaving him super-rich and all the workers and creditors he owed money to in seriously dire straits, as he continued to ply the Chao Phraya in his yacht, dine at Zanotti with a gaggle of young Chinese ‘girlfriends’ in tow, and spread propaganda on TV and in print. (sorry to digress, but any time is a good time to take a gratuitous swipe at Sonthi, that grimy, detestable fat fuck!)
View all comments by Alan Smith
@ AS - I really don’t know that much about Thai politics, I only get the 30,000 feet view one gets from a google news thing. You’re probably right, I just don’t know.
That said, and I’ve been harping on this for a while, the baht is tracking the yen more than it’s tracking the dollar. Both have been going up in price, the yen because people want to pay off money borrowed in Japan, and the dollar because people are looking for safety. If I were a Thai central banker right now, I’d not be too happy that my currency was tied to either. But I’m not, so I leave it to them.
Tough times for everyone.
View all comments by Tosh
The Baht will continue to drop against the $US, but i think it will have more to do with the US slowly coming out of recession, Key word being SLOWLY. As we begin to come out Thailand will be going into the ASIAN part of this worldwide recession.
SSB, hope you are out of your christmas blues. I happen to have one of my most stress free holidays in several years, and the entire year leading up to now was nothing but a mess. All i can say is that watching my 4year old open her presents that morning made everything
roll away. By the way if you want to laugh give a 4 year old a $2 whoopi cushion and your life will be nothing but gold. Sorry guys but life only sucks if you let it. It took my little girl to show me that. Enjoy your New Year with the Ghost and all of those lovely ladies of the Mango.
View all comments by burgerman
Well the baht was weaker during the airport shut down- so much that I transferred 900K baht into my US bank account at a rate of 35.35, after that the baht slid down to 35.7 before coming back up to 34.5. So my timing isn’t the best! Now it sits closer to 35 but while it may bounce around +/- 10% relative to the USD, I don’t think it’s going to move that drastically.
In this global crisis no currency is safe. The US and Europe are having record low interest rates and bailing out companies with taxpayer money right and left. The Asian countries are suffering with slower growth but have strong country balance sheets. Short term, who knows? Australian dollars will come up when we exit this recession and China starts buying commodities en masse again.
-Jeezo
View all comments by jeezo
As a “Contrarian” I am disappioned that the range that you posted for February was 35 to 40. Currently it is 34.6 and and the THB recently has been trending stonger. Thus if you gave a range from 32 to 40 I would have selected 33.7. Not that I believe that this strength is justified but that February is only 33 days away. Far to soon for a great move in the free market and far too quick of a time for the Thai Government and its different agressive factions to come to some agreement to do a formal devaluation. Espeically a major devaluation becuase of the severe impact it will have on the cost of living to the Thai people.
Also there is no move on the part of the new admistration to stengthen the US dollar as it will hurt US Exports which is the only segment of the US economy that is showing growth.
Now if you lenghened the evaluation/forecasted period to say June 2009 then I couls see a 10% devaluation as a comprimise to 38 THB=1USD. But in truth this is not enough to help the Thai economy. For devaluation to be effective it has to be in the 20% range to about 41 or 42 THB because no one in the West is buying nor traveling so the incentive must be great.
So 33.7 February
38 June
THB collapse in Q4 2009 similar to 1997 when it wnet from 25 THB to 55 THB almost overnight and I was paying about 10 USD for an ocean front hotel in Phuket
So that’s the “contraian” prediction which was not allowed to be expressed by your posted range of 35 to 40 THB
View all comments by 8 Ball
yeah, soros did good didn’t he? who knew hungarians were so sharp.
what’s george saying NOW about the SE Asia currencies? anyone know ?
the baht’s in a range, right (?), but trending lower.
now putting 900,000 in a thai bank. that’s a brave man!
View all comments by jack dawson
pg - the pound problem is not about the baht. the pound has been devalued. If they did the same to the baht then the baht would fall against the pound. this is not a dollar thing. I don’t think they are talking about wiping it out but making it a tad more competitive. this is not like 97
debt star - totally agree.
tosh - u r correct but part of the new stimulus plan is to force the banks to loan to small businesses on some massive scale. so the banks may get affected some.
fd - sure but being it is not a free the country can manipulate it - up and down.
d - same answer to the brits. the auusie dollar got routed - just like the pound. this is not about the baht but a weaker baht would be weaker against all currencies. your’s too. so point being the baht dropping would be good for u but your comment on value - where is it you can go where the aussie dollar offers some value?
alan smith - u r correct but to be clear thailand was heading for trouble due to the export market falling and the normal effects of a recession but for sure these guys made it a lot worse. sucks indeed.
burg - u r correct. I am looking forward to next year.
jeez - good points and some are calling this the race to zero and if so probably better for your country to get there quicker so as to stay competitive. especially if your country is tied to exports and tourism to some extent.
8 ball - the thai government is currently propping up the baht to keep it form moving fast. all they have to do is stop the propping up and it will move. notice the past weeks with the dollar and the euro? things can move fast. I dont think the baht will get much stronger - hence the scale I chose. some are already calling for 36 in late jan.
we shall see - your comments will be a record of your forecast.
good stuff.
I dont see it dropping out - I just see it as needing to get somewhat weaker to help thailand out.
great comment thread folks!
View all comments by sideshowBOB
my 2 cents: the baht’s trading range really hasn’t moved, what HAS moved is the pound/Aus$, euro etc. I’m sympathetic with all Thailand-fans paid in those currencies.
but, i think the most relevant thing here is what The Ghost wrote above about 1997 (and Happy B-Day PG!):
- Thais went through Pattaya, marching into farnag businesses ordering them to take on Thai “managers” and if they didn’t, their buildings were vandalized.
- Knee jerk price increases. Price increases far outstripped the actual devaluation. The 500 baht long became 1500 overnight.
Add in the Airport Dingbat Foot-Shooting Contest and you see a few trends:
- Panic followed by thuggish behavior and new loopy “regulations.” On my recent trip to LOS, there was an announcement as we descended into Cobra Swamp Errport: “all tourists intending to stay longer than 15 days must file an itinerary”…yes, this was announced over the plane’s loudspeakers, although of course it was unenforced. Presumably it’s in line with the new 15-day visas issued at land-crossings (you still get 30 days at Cobra Swamp). Perhaps someone can explain the logic to me, although I doubt it.
- Contrarian price increases (”as there are fewer tourists, let’s attempt to rape them deeper, yes yes, good logic”). Also on this trip, on my favorite Thai island, prices for boat trips and scuba dives were jacked up. The most outrageous was a 1,500-baht per/person “fuel surcharge” for one divesite versus another, two sites perhaps 20-30 km apart. On another day, we chartered a longtail boat for the day from a local travel agent, but she called back later to announce a 50% increase in the agreed-upon price. Needless to say, we refused to pay these prices and had an excellent (and cheaper) holiday without contributing to blatant extortion.
Note that this was on an island largely devoid of tourists, where people would wave frantically out of empty restaurants as we drove by on our rented motorbikes. They count on a three-month high season to sustain them for a year, and had monsoon-rains for three weeks in November, I was told, followed of course by Airport Idiocy. The pleasant, well educated owner of the bungalow-operation we occupied wrung her hands as she prevaricated: “the AoT closed the airport, not the protesters…the PAD only occupied the sidewalk, not the airport, but the guards had to let them in so they could use the bathroom…” I interjected that international guests aren’t much interested in internal Thai squabbling but when you trap them in a country, preventing them from returning to families/jobs/medical situations, they are unlikely to become repeat visitors. I mentioned the Hong Kong man who was killed in a minibus-crash trying to get to the Phuket airport, just so he could get back to his home and family.
She wrung her hands some more.
So, what’s going to happen to the baht? No idea really, but frankly, judging from the non-crowds at Cobra Swamp when I flew out yesterday, I don’t think it matters all that much unless it does a serious plunge, like hitting 45-50. But then of course, “fuel surcharges” will be 3,000 baht, so it all evens out.
Mai pen rai. Mai pen fucking rai. Keep repeating that until your head hits the floor.
JtB
View all comments by Jack the Bat
I may be an idiot, but I wired all my Thai savings to the UK last week. The rate was about 52. With the rate so low and, from what I’ve read, not likely to go much lower, it seemed like a good time to take advantage of it and wait for the pound to recover. Or maybe I’m an idiot.
View all comments by Matt
Matt,
Probably a good move. Better to buy low sell high. And the pound is very low right now.
Trouble is that I’m being paid in baht although it’s referenced to a US base salary at the fixed rate of 34.5 THB/USD. Won’t re-adjust until it gets weaker than 38.5 or stronger than 34.5. So I’d rather have the baht stronger than 34.5 or weaker than 38.5… strange dilemna, no?
Either way I’m accumulating baht and need to move it periodically or ring the bell more at the bars…
View all comments by jeezo
sorry, in the above note meant to say stronger than 30.5 THB/USD would trigger a re-adjustment, potentially. Not like that’d happen in the near future though.
View all comments by jeezo
JackBat - “Note that this was on an island largely devoid of tourists”
If you don’t mind sharing, Which island is thia?
View all comments by dj
Um, if you told me I had to short one currency in the developed world right now it would be the pound. The UK has a housing bubble going that makes the US one look like kiddy play. Careful with them pounds then.
View all comments by Tosh
I voted for 38 as I’m doing my bit to assist a self fulfiling prophecy. My holidays, my ball massages and my Isaan villa are getting cheaper by the week.
View all comments by Combover
Actually, after checking (www.oanda.com), the baht was as low as 38 versus the US$ as recently as early December this year. It was last consistently at this level in around July 2006, prior to which it had been pretty much always worse going back to December 2003. Not such a ‘kidding’ myself vote at all it would seem.
View all comments by Combover
@ dj: Lanta.
JtB
View all comments by Jack the Bat
“The Soros thing is just a knee jerk reaction. All of my lefty friends seem to think the guy is a saint, I like to remind them he made a lot of his money blowing up third world countries.”
I doubt the brits would take too kindly to that comment!!
Seems like most of the discussion is what the baht will do against the dollar in particular. I’m a baht bull for the moment, given all the quantitative easing and other financial stimulus going on in the US at the moment (and which will likely continue through 2009). Helicopter Ben is being true to his word as the fed’s balance sheet balloons. I can’t see the BOT (or most other central banks, for that matter) matching these actions without serious repercussions for their currency. They actually have much less motiviation to do so when compared to the US - Americans simply demand a quick fix to their economic situation - we’re spoiled. Somchai the rice farmer, on the other hand, is far more willing to accept his poor economic lot for some time.
View all comments by go go groupie
In what sense is the Thai Baht not a freely traded currency in precisely the same sense as are the Australian and US dollar? Would seem that the Thai central bank has precisely the same tools at hand as the aforementioned two.
View all comments by fanta
“THB collapse in Q4 2009 similar to 1997 when it wnet from 25 THB to 55 THB almost overnight”
Not quite. The Baht was floated on 2 July 1997. It didn’t hit 56 Baht to the US dollar until January 1998. Not really overnight.
View all comments by Reality check
f - it pretty widely circulated that the baht is not truly freely traded on the offshore and onshore exchange rates are not similar. So I dont think it can be compared to being freely traded like the US dollar.
rc - correct. I also dont think we are talking about a crash here either I just think the baht will have to weaken due to fundamentals and the fact that it might have to help out the local climate.
View all comments by sideshowBOB
@ fanta - The baht trades MORE freely than pretty much all SE Asian currencies (the Singapore dollar being a glaring exception), but the BoT can and fairly often does try to keep it in a range that it thinks is best for the economy. To do that, they need capital to buy and sell on the open market (most recently they’ve been buying lots of dollars) which they apparently have a decent amount of. In the US the fed, as noted here, can use its balance sheet and the famous full faith and credit of the United States to borrow money at insanely low rates, nearly for free on short term notes at this point. So even with no more ammunition in interest rates it still has some arrows in the quiver.
As with most things in the American government the fed looks like a really stupid idea until you consider the alternatives. The central bank of the EU, for example, can’t tax anyone and can’t tell its member central banks what to do, so Germany can have monetary policy that is fundamentally hostile to, say, Spain’s monetary policy and nobody can do anything about it.
Here’s hoping the baht is wearer in late Feb, and that fact helps the Thai economy.
View all comments by tosh
tosh - sure it trades more freely than other SE asian currencies but that’s not saying much. It is like saying that 2 fat people standing side by side can make one guy look thin just cause he is slimmer than the other. they are both fat. So not really an apt statement. Compared to other asian currencies the baht is fairly well controlled with trading bands and lots of government manipulation.
View all comments by sideshowBOB
SSB – Be nice, fat people have feelings too you know, just ask B*B ! (Name changed to protect the innocent)
View all comments by Riodon
the thai baht will crash like never before i see baht back at 80 to 90 to uk pound streling buy june next year
its going to be messy for some on the bottom of the ladder
View all comments by udon expat thailand