Exchange rates poll (5 day poll - ends January 26)

[Gaybutton]

Now that Trump has officially taken office, three possibilities are likely to happen to the exchange rates.

What do YOU think will happen and what are your comments?

[Undaunted]

I voted other as the dollar is likely to remain a flight to safety as the euro and pound continue to struggle regardless of who is president and interests rates will continue to rise these factors will keep the dollar rising against other currencies including the baht on another note usually gold and the dollar head in different directions not so anymore as both are a safe haven.

[readerc54]

Voted "other" because I'm unsure of the time period. In the near term (say 3 months) I think it will fluctuate with a slight upward bias for the USD. For longer (2017) I believe the key factor is whether or not Congress supports Trump's call for more infrastructure and military spending. If it does, the dollar and other western currencies should outperform the THB as US interest rates rise.

[Jun]

Other.
I don't know. At least it's a known unknown in my case.

My guess would be stronger dollar over -1 year & significant weakening of the dollar over a 10 year period, on the back of all the deficits & borrowing. This presumes nothing stupid is done on the Thai side of the equation.

If I were a US citizen living in Thailand, I would be looking to reduce exchange rate risk by investing in Asia. As British citizen I invest abroad to reduce the risks to my future plans.

[Daniel]

I think Trump taking office will have little or no impact on the dollar/baht exchange rate. Both economies are doing well, and I don’t foresee an enormous change in either direction for either country.

[Up2u]

I anticipate no major changes for the dollar vs thb, perhaps a slight increase to 36-36.5, other currencies are more contigent on the Thai economy and government situation. The Feds will raise interest rates as promised to offset increased government spending. Eventually the cycle begins again.

[fountainhall]

His long term goal will be to devalue the dollar, much as China has done with their currency.

I always wonder where this myth about China devaluing its currency comes from. The facts are quite simple.

From 1993 till around 2005 China pegged its currency to the US$ at a rate of about US$1 = RMB8.25, much like the Thais had done in the couple of decades prior to the crash in 1997. Then China changed the system and pegged the RMB against a basket of several currencies. This resulted in the RMB increasing in value against the US and other currencies. By late 2013 it had hit around US$1 = 6.10. This, let's recall, was the time when the world was reeling from the 2008 global financial crash and many currencies had lost value. The RMB actually increased in value!

More recently China increased the basket of currencies against which the RMB would be valued. Part of the effect has been a gradual cheapening of the the RMB overall by about 13% since the high point about 3 years ago. Since the rate floats surely this is perfectly understandable when you compare it with some currencies presumably in the basket - sterling, euro, Australian $. All these have fallen more than 13% against the US$ over the same time period! Where is the evidence? Does the US call these other countries currency manipulators? Are these countries to blame for the surging US$? And how can Trump revalue the US$ downwards if, as seems most likely, US interest rates are going to keep rising?

[Up2u]

As noted China's currency is pegged and other countries charge it with manipulating since it does not let it float freely on the fx market.

China should stop intervening in FX market and let yuan float- researcher

http://www.cnbc.com/2017/01/15/reuters- ... rcher.html

[fountainhall]

Interesting that that article advocates quite a substantial decrease in the present value of the RMB/Yuan of as much as 25% when what Trump and his cohorts seek is a major upward valuation!

Why is it necessary for currencies to float? About 30 don't. What about the HK$? That has been fixed at US$1=HK$7.8 since the near collapse of the currency in 1983. Since then it has had good times and bad - the latter notably during the Asian Economic Crisis when every other Asian country devalued - except China and Hong Kong! The HK government also fought off a sustained attack by the speculators with amazing success. That ended up with the speculators losing billions and huge profits accruing to Hong Kong.

[Jun]

Why is it necessary for currencies to float? About 30 don't.

To fix a currency, it is usually necessary either to have interest rates following the target currency or to have capital controls to restrict movement of currency.

Targeting someone else's interest rates can mean inappropriate rates for your own economy. We have seen a long list of countries have problems there, with examples in recent decades including UK, Thailand & Argentina. There are many more.

Capital controls restrict peoples ability to move their money, which is in my view an unacceptable limitation on personal freedom. It also restricts trade & people will make efforts to circumvent the controls.

Also, any country fixing it's exchange rate could be accused of fixing it at an unfair rate to gain trade advantages, which is not free trade.