Mosha
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Post by Mosha on Jul 4, 2023 19:04:08 GMT 7
It's back at 44 36.
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chiangmai
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Post by chiangmai on Jul 4, 2023 20:40:02 GMT 7
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chiangmai
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Post by chiangmai on Jul 5, 2023 10:16:25 GMT 7
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chiangmai
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Post by chiangmai on Jul 7, 2023 9:00:22 GMT 7
The UK/US interest rate picture is playing havoc with currency exchange rates. The UK just forecast 7% rates so the FTSE took a deep dive, anyone involved in investing funds will have had an uncomfortable 24 hours. But the upside (for expats) is that GBP (and USD) strengthened against the Baht so now the downwards spiral that started earlier in the week has reversed.....but for how long. The much watched US jobs report is out any time now, that should give a clue as to whether the Fed will increase interest rates again this month (I'm betting they will), in which case expect further USD strengthening and an even better exchange rate. Equities are another story, urgh, ugly, it's a give with one hand and take with the other picture. www.independent.co.uk/news/uk/home-news/base-interest-rate-bank-of-england-inflation-b2370132.htmlwww.ft.com/content/d3b06ad6-6b96-42bb-9fac-ebe1b8dc7fa6
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chiangmai
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Post by chiangmai on Jul 7, 2023 9:53:14 GMT 7
Just a quick observation about Baht Pound.
I first started having my UK State Pension deposited into my Bangkok Bank account in May 2022, since then, the GBP/THB rate has been in the range 40 to 45. The amount actually deposited into my account in Baht has varied by up to 1,200 per month. I'm not sure how the exchange rate is calculated, I don't think it's on the basis of the rate on the day of the remittance and may in fact be an average daily rate that is calculated daily....dunno.
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chiangmai
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Post by chiangmai on Jul 7, 2023 11:48:28 GMT 7
You can almost guarantee that whenever a negative financial or economic event is reported in the Thai media that a mass of posters, from you know where, will immediately link the news to the rise of fall in the Baht exchange rate. Such was the case today when an article appeared suggesting that the BOT might reduce the central bank lending rate, because some borrowers were becoming over stretched. If only things were that simple!
The Baht did weaken today, but not because of what the BOT Governor said, it weakened because the US and UK pointed more firmly towards increased interest rates and this strengthened their currencies against THB.
My observations are that there is very very little that Thailand can do to influence the exchange rate, virtually all the price action comes from events that are USD or GBP related. If of course there is a sudden surge in tourist arrivals, that will move the value of the Baht from the Thai side. Ditto if Thailand suddenly discovers new export markets that causes customs exports to suddenly surge. But both those things are reliant on external factors and the economic conditions in other countries. The problem is that THB is far too small to move far under its own steam, to do that it needs lots of help from the Pound or the Dollar or there needs to be a major economic event in country, eg another 10 million tourists per year.
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siampolee
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Post by siampolee on Jul 7, 2023 12:39:23 GMT 7
As I understood it, the transfer of state pension funds is initiated three days prior to the actual payment day. Thus the exchange rate is the one prevailing on that day. but it is not an unknown move by the Bank of Thailand to select what for them is a better foreign buying rate (read cheaper) that is, or maybe in that three-day window. Info gleaned from a neighbour who is a staff member of one of Thailand's banks and is involved in currency exchange etc. So for instance, if the Thai baht today is quoted at 44.50 to the pound sterling, the bank buying rate would be around 43.20. That's my understanding of it anyway, please don't presume it's gospel as I am a bit of a Dilbert in the realms of currency exchange...
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chiangmai
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Post by chiangmai on Jul 7, 2023 12:54:58 GMT 7
That all sounds as plausible as anything I've heard previously and may well be the case. I'm not altogether on board with the BOT rate manipulation part, the UK State is paid every four weeks which means the date of transfer constantly moves. The US State on the other hand is paid on the 3rd and 14th of the month which means rate fixing would be easier to achieve but even that seems improbable to me. There are just too many eyes on exchange rate and BOT activity for manipulation to go unnoticed, in which case all heck would break loose. The sorts of currency manipulation that the Fed keeps harping on about is of a different make up to every day rate changes, that's based on trade and the near constant current account surpluses, candidates in this class include Germany, Vietnam and Switzerland! I wrote the following piece a couple of years, under a different name for the chaps across the way, it contains some useful and interesting links that discuss manipulation in more detail. As a starting point, it should be understood that the Thai Baht is not freely convertible. That means THB cannot be exported from Thailand in any volume, with the exception to neighbouring countries and Yunan Province in China where a 2 million Baht limit exists. THB is traded on global markets but not for delivery. Even banks outside Thailand are restricted from holding THB beyond certain levels. As a consequence, BOT has global control over the value of THB and offshore hedge funds etc cannot take effective positions against the currency to influence its onshore value. Slowly, over time BOT has relaxed many of the currency restrictions placed on both exporters and consumers. For example, even five years ago, exporters were required to sell their foreign currency earnings to the BOT, within one year. Today, exporters are allowed to invest that foreign currency overseas, which delays exporters having to sell USD for THB and further strengthening the Baht. This move was established by BOT to help weaken the Baht. The Thai Baht (THB) is not pegged to USD. But since exports represent about 60% of the Thai economy (GDP) and export bills are mostly settled in USD (which is required to be sold to BOT), the value of the Dollar is important to the economy, mostly to the value of THB. As currency swaps are used more often to pay for exports, along with increased Thai participation in the RCEP (mostly regional + China and Aus.) trade program, the level of influence on THB value, by Dollars earned from exports, will reduce substantially. This has major implications for THB value in the not distant future. THB is a very small boutique currency that represents less than 0.5% of daily FOREX volume, consequently, it doesn’t take much volume to change its value. On the other hand, THB is the 22nd most traded currency in the FOREX. The combination of those two things means at times it can be quite volatile, intra-day swings of 3% are not uncommon. Foreign currency from inbound international tourism (approx. 11% of GDP) is sold to BOT and this becomes part of the Foreign Currency Reserves, which are accounted for in USD and held in safe custody of the Bank of International Settlements (BIS). That trade in foreign currency does not in itself directly increase the strength of THB but the increase in the Foreign Reserves does, since this reflects a robust economy that is financially secure. The direct benefit of tourism to the country is therefore not necessarily a stronger Baht, but increased earnings, employment and GDP. Currencies are traded in pairs, for example, USD/THB. There is no fixed relationship whereby the value of the Baht against one currency means that it must equal a fixed amount against another currency. All currency values move independently, unless a fixed relationship exists. All the major currencies such as GBP, JPY, EUR have a direct relationship with USD, lesser currencies have a relationship via one of those major currencies or by means of a calculation that involve them. For example, the British Pound, GBP, does not have a direct FOREX relationship with THB, instead, GBP/THB is calculated using the following formulae: USD/THB x GBP/USD. This mean that whilst the value of USD/THB is influenced by two currencies/economies, the value of GBP/THB is influenced by three and the reason for movements in that pair is not always immediately obvious. The US Dollar is the major global Reserve Currency, it sits at the top of the FOREX tree and THB is measured against it. The value of USD fluctuates but it’s value is determined by similar factors and in the same way that other currencies are. The value of USD is measured using the benchmark US Dollar Index (DI). The DI compares the value of USD to a basket of six major currencies and expresses that value as a percentage. When USD is strong, the percentage increases above 100, when it is weak it dips below. The USDI value is currently 102, a link to it follows: www.marketwatch.com/investing/index/dxyThere is no comparable index that measures the strength of the Pound, although the Exchange Rate Index (ERI) comes close. The ERI is a measure of the overall change in the trade-weighted exchange value of sterling, calculated by weighting together a dozen or more bilateral exchange rates. The ERI value is currently 77 and the base year value in 2005 was 100, a link to it follows. As can be seen, GBP is running at only three quarters of its historic strength: www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/timeseries/bk67/mretSupply and demand for a currency is the biggest reason for a change in value. Currencies increase or decrease in value because of underlying economic factors and/or because the currency is bought or sold against USD. Most often, it is changes in those underlying economic factors that cause the currency to be more or less heavily traded. Underlying economic factors include the current and forecast state of a country’s economy, government (or public) debt levels (not consumer debt), capital (in and out) flow, money supply, inflation levels and interest rates, amongst other things. Whilst some believe that the BOT manipulate the value of the Baht, it is highly improbable that they do. BOT is obliged to manage undue exchange rate volatility and to conduct exchange rate smoothing operations, under IMF rules. It cannot be ruled out however that other entities such as major banks and brokers collude to manipulate values since this happens periodically in other cities around the world also. Most people who believe that BOT manipulate the Baht exchange rate think the underlying reason is to keep the Baht strong. The reality is the opposite, most attempts at intervention (not manipulation) by the Central Bank are to try and weaken THB, or at least maintain it in an optimum range, because its natural tendency is to strengthen on its own. An unnecessarily strong Baht hurts exports hence the trend has been for BOT to try and weaken the Baht. Lastly, much has been made of Thailand being accused of currency manipulation by the US Federal Reserve and being placed on a watch list. The type of manipulation described by the Fed. Is not straight forward buying and selling currency but involves a much more complex trade aspect where exports are always greater than imports, particularly to the USA. This has the effect of creating a current account surplus which in turn strengthens the currency. This subject is described more completely in the following link and shows graphically, other alleged currency manipulators which also includes Vietnam, Switzerland and Taiwan! www.cfr.org/article/tracking-currency-manipulation
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chiangmai
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Post by chiangmai on Jul 11, 2023 8:07:27 GMT 7
Maybe something, maybe not much, but an indicator at least: The Chinese are flying on holiday again, not as much as pre-covid but it's a start. Most travel seems to be domestic but the international travel scene is improving: "Hong Kong, Bangkok, Macau, Tokyo and Singapore were the most popular destinations, with travelers spending an average of $415 per hotel booking". (no surprises there) skift.com/2023/06/26/chinas-latest-holiday-points-to-summer-strength-in-outbound-travel/
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siampolee
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Post by siampolee on Jul 11, 2023 19:43:25 GMT 7
What could be interesting in its possible effect on the baht would be or could be what transpires this coming Thursday, July 13th. The effects in that area will possibly or could affect not only the Thai baht but possibly social issues as well. Indeed, in the short term and possibly the long term we could be in for an interesting ride.
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chiangmai
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Post by chiangmai on Jul 11, 2023 20:27:17 GMT 7
Logically, you would think there might be an impact on the Baht if trouble does break out on 13th. But looking back at 10 April 2010 when Bangkok saw tanks on the streets and snipers on the BTS tracks, THB actually strengthened against USD and continued to do so for four years after. During 2013 and 2014, a period of political unrest, the same thing happened. Why? The major movers of THB value are USD strength or weakness, followed by demand and then by Thai economic factors such as Customs exports and inbound tourism numbers. Political uncertainty and civilian unrest appear to be of no consequence and historically haven't had an impact, given there have been so many coups and events similar to 2010, everyone knows that things will sort themselves out and life will move on. In other words, this type of unrest is already factored in, the exchange rate cares more about hard numbers and economics than it does about politics that will have no impact on exports or tourism. tradingeconomics.com/thailand/currency
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chiangmai
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Post by chiangmai on Jul 12, 2023 5:44:18 GMT 7
USD is weakening which makes THB seem stronger, they say it's because the US Fed is thought to be close the end of raising rates. I think close only applies in the game of horse shoes, who is the "we" who thinks this I wonder? It's true that stocks have risen because markets seem to think we're also close to the end of rate increases, this means markets up so currency down, perhaps that's what it's all about. Put another way, equities markets are gambling once again that the forthcoming inflation report will be positive and this has pushed the value of USD down. The US CPI report is due this Wednesday evening, US time, markets are expecting 3.1%, down from 4.0. Even if they get that, the Fed may still continue raising rates by small amounts because the July rate hike is likely to already be a done deal, which will likely see USD strengthen again.
The trickiest part of all of this is trying to figure out, when something moves, why did it move and which small part of the bigger picture did move. It would be logical to think that THB strengthened because of the vote on the 13th but the reality is many miles away, in a different sector entirely.
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siampolee
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Post by siampolee on Jul 12, 2023 10:32:21 GMT 7
Certainly, the two posts above this one from chiangmai are indeed informative and have filled a gap or two in my (albeit scant) financial knowledge.
Seems as in truth that the Thai baht is something of a ''Siamese Twin'' connected to the U.S. Dollar and the capricious whims of the Federal Reserve, with a pinch of Thai politics thrown into the mixture too. Also, an interesting coincidence that one of Thailand's English language portals seems to be currently offline at the moment. There had been a great deal of robust discussion on the site regarding the selection of whoever may or may not be the next Prime Minster and just what the eclectic collection of the next Parliament may or may not be...
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oldie
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Post by oldie on Jul 12, 2023 10:51:50 GMT 7
I don't understand a word he says, but I give him a "like" to give the impression I'm well versed in finance. Which obviously I'm not.
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siampolee
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Post by siampolee on Jul 12, 2023 11:01:59 GMT 7
I wonder if this may help fill a gap or two in your financial knowledge oldie?
I well remember this lecture when the UK went on to adopt plastic decimal money...
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