Now Bank of Thailand says baht will reverse itself and weaken

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Gaybutton
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Now Bank of Thailand says baht will reverse itself and weaken

Post by Gaybutton » Thu Dec 05, 2019 8:14 am

I sure hope they're right. I don't know about anyone else, but I'm tired of seeing articles one day telling us the baht will strengthen and the next day telling us the baht will weaken. Make up your minds, willya?

I suppose we all can happily speculate, but the way I see it, at least for the moment what will happen is a toss of the coin.
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Also, if you are interested the Bank of Thailand has made its economic database public. It is in English. I don't understand any of it myself, but for you folks who have some understanding of it, here it is:

https://tide.pier.or.th
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Bank of Thailand soothes jitters over baht gain

by Darana Chudasri

December 4, 2019

The Bank of Thailand has allayed businesses’ unease over the baht’s gain, saying the currency could reverse its trend and two-way movements vis-a-vis the dollar/baht are expected to increase next year.

Global investors are starting to view the baht as overvalued, given the country’s economic slowdown, the narrowing current account surplus and a razor-thin spread between the Thai and other nations’ rates, said central bank deputy governor Mathee Supapongse. This means the currency might no longer be seen as a safe haven, he said.

The Thai policy rate is lower than the US and almost the lowest in Asean, weakening attractiveness for speculation, said Mr Mathee.

“The baht is starting to reverse its [upward] trend. We did not do anything, but the market views the baht’s upside gain as limited,” he said.

The baht over the past couple of years largely strengthened against the greenback. The local currency advanced around 7.5% versus the dollar so far this year, making it Asia’s top performing currency.

There are higher short positions in non-resident baht accounts, said Mr Mathee, though earlier such accounts took a long position on the baht.

“The central bank does not feel complacent over the recent baht surge. We’ve imposed measures to rein in the currency including tightening regulations on non-resident baht accounts and periodically stepping in the foreign exchange market to tame baht gains. The outcome of the four latest measures has not been significant,” he said.

The central bank last month relaxed regulations related to exporters’ foreign currency proceeds and foreign securities investment to encourage capital outflows and curb the baht’s strength.

Those included allowing exporters with proceeds below US$200,000 per bill of lading shall to keep the proceeds abroad, without a time limit, a relaxation from the current $50,000 threshold, enabling retail investors to invest up to $200,000 per year in foreign securities, without having to invest via a Thai intermediary, and liberalising outward transfers, which are currently allowed based on a positive list of specific purposes, with exception for a few specific purposes.

https://www.bangkokpost.com/business/1808634

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Re: Now Bank of Thailand says baht will reverse itself and weaken

Post by 2lz2p » Thu Dec 05, 2019 10:25 am

Gaybutton wrote:
Thu Dec 05, 2019 8:14 am
I sure hope they're right. I don't know about anyone else, but I'm tired of seeing articles one day telling us the baht will strengthen and the next day telling us the baht will weaken. Make up your minds, willya?

I suppose we all can happily speculate, but the way I see it, at least for the moment what will happen is a toss of the coin.
Totally agree. When I was young (I really was once), I spent my school summer vacations on my paternal grandparents farm in Southwest Oklahoma - they had a "weather gauge" with a donkey drawn on it and a "brush" tail attached -- although not the same, the wording on the one shown below is very similar. This is how I gauge all the baht exchange rate predictions, it is what it is on the day it is :D .


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Re: Now Bank of Thailand says baht will reverse itself and weaken

Post by Jun » Thu Dec 05, 2019 12:40 pm

There is (somewhere) a study on interest rate predictions that shows the direction of the next interest rate move is correctly predicted just over 50% of the time.
For something with only 2 possible outcomes, it means the forecasts are about as good as tossing a coin.

I treat currency forecasts with similar suspicion and diversify rather than speculate.

Actually, I just had to get some baht. We might expect the pound to strengthen on the 13th of Dec in the probable event that Mr Corbyn cannot be UK prime minister with a Labour majority. So I could defer most of the purchase until then.
However, I am not George Soros. I also suspect that the forex market correctly incorporates all the available information. There is a high probability of a small currency gain with one outcome and a small probability of a large loss with an alternative outcome (I think).
I bought all my baht in one go.

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Re: Now Bank of Thailand says baht will reverse itself and weaken

Post by Gaybutton » Thu Dec 05, 2019 4:05 pm

Just to show how clueless I am about economics, I have no idea why cutting the interest rate would weaken the baht. Perhaps someone can explain it to me.

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Re: Now Bank of Thailand says baht will reverse itself and weaken

Post by Jun » Thu Dec 05, 2019 5:24 pm

Gaybutton wrote:
Thu Dec 05, 2019 4:05 pm
Just to show how clueless I am about economics, I have no idea why cutting the interest rate would weaken the baht. Perhaps someone can explain it to me.
If Thai interest rates go up, people can borrow at low interest rates in places like Japan and Germany to invest in Thailand at higher rates and make a profit. So money is converted to Baht and hence the baht goes up. Or vice versa for interest rate cuts.

This only works if there is some confidence in the economy as well. So if interest rates go up in Argentina when the economy is tanking with yet another default looming, not so many people are prepared to risk buying Argentine Pesos.

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Re: Now Bank of Thailand says baht will reverse itself and weaken

Post by Dodger » Thu Dec 05, 2019 6:01 pm

Jun wrote:
Thu Dec 05, 2019 5:24 pm
So money is converted to Baht and hence the baht goes up. Or vice versa for interest rate cuts.
I like the donkey and brush tail method. Just as reliable, and no worse odds.

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Re: Now Bank of Thailand says baht will reverse itself and weaken

Post by Undaunted » Fri Dec 06, 2019 10:30 pm

"In the land of the blind the one eyed man is king"

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Re: Now Bank of Thailand says baht will reverse itself and weaken

Post by Jun » Sat Dec 07, 2019 12:34 am

Dodger wrote:
Thu Dec 05, 2019 6:01 pm
I like the donkey and brush tail method. Just as reliable, and no worse odds.
Well, considering the full time currency traders should, on average, incorporate all known information about predictions of interest rate movements and other factors into the rate, it's difficult for us to do any better.

So pinning the tail on the donkey us a good analogy.

For forex rates, I take the view that I don't know and therefore try to arrange long term finances to be diversified and less sensitive to exchange rates.

For short term, I have even less clue. I usually change all my holiday money on the day of arrival. This time it might prove to be the worst date of the trip. I've also seen the first day offering the best rates of the trip.
However, spending for one holiday is a small cut of the pie and I don't waste time worrying about sunk costs for things beyond my control.

On the other hand, anything within my control is continually optimised. So, for example, I won't pay 3% to change money when I can do it for 0.5 or 1%.

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