Baht - Where is it going?

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Gaybutton
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Baht - Where is it going?

Post by Gaybutton »

For farang, if there is a silver lining on the cloud, it is the exchange rate. In my opinion, while the exchange rate still sux, it at least is better now than it has been in quite some time. I can't say I'm unhappy about that, but I certainly can say I'm unhappy about the reasons this is happening.

Now it is much more than the tourism industry and the peripheral industries dependent on it. The economic problems have become much more extensive than just that. It seems like everything Thailand is trying to do, helping the tourism industry and everything else in real trouble, it all keeps falling through and so far nothing has worked. I believe next on the list of failed attempts will be the "sandbox" schemes. Based on all we've seen, I can't help but think whatever clever idea they come up with next, whatever it will be, that too is far more likely to fail than succeed.

I used to ridicule the gloom and doom. Now I find myself more likely to ridicule anything that isn't gloom and doom.

It is hard to predict where all this is going, but it certainly seems to me things are going to get worse - much worse - before they get better. I hope I'm wrong, but for those of you hoping for a holiday in Thailand, I believe the reality is before you're coming back, take the longest prediction you've seen about how long it will be and at minimum double it.
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Once Asia’s top performer, the Thai baht is now becoming the region’s worst-hit currency

by Weizhen Tan, CNBC

July 25 2021

The Thai baht, once the strongest-performing currency in Asia before the pandemic, has been steadily falling in 2021 and is this year’s worst-hit currency in the region, according to Mizuho Bank.

The Japanese bank pointed to “uncharacteristic under-performance in the Thai Baht, rendering it the worst performer to date in 2021” in a note on Friday.

The Thai baht has plunged more than 10% against the U.S. dollar year-to-date, as of Monday morning, according to Refinitiv Eikon data.

Thailand’s currency is the weakest-performing this year compared to other major Asia Pacific currencies, according to Refinitiv. Against the greenback, the Japanese yen is nearly 7% lower, the Malaysian ringgit declined by 5%, while the Australian dollar is down 4.43% year-to-date.

“At face value, THB as the unequivocal and significant laggard does not square with Thailand’s solid (albeit diminished) current account surplus or relatively low inflation,” wrote Vishnu Varathan, head of economics and strategy at the bank.

In 2019, before the Covid pandemic hit, there were concerns about the strengthening Thai baht, which was buoyed by its large trade surplus. A stronger currency makes the country’s exports more expensive, causing them to be less attractive in international markets.

Tourism decline hits Thailand

Still, the Asian currency’s underperformance this year cannot be solely blamed on the Covid pandemic, considering that the impact of the delta variant on the rest of the region is “far more dismal,” Varathan said.

Varathan pointed out the sharp decline in tourism numbers has actually multiplied the “Covid devastation” on Thailand’s economy.

Thailand had only over 34,000 tourist arrivals as of May this year, compared with over 39 million in 2019, according to data from its tourism ministry as well as the World Bank.

The Southeast Asian nation relies heavily on tourism dollars for economic growth. Tourist spending accounted for about 11% of Thai GDP in 2019, before the pandemic.

Fewer tourists also mean lower demand for the Thai baht.

“The sheer force of this ‘tourism multiplier’ means that it remains the decisive drag on THB,” Varathan said.

“Further ‘variant risks’ and attendant rolling delays to tourism/travel resumption will continue to pose a clear and present threat to the THB,” he said, referring to new variants of Covid.

‘Very challenging’ to reopen to tourists

Thailand’s over-reliance on tourism is going to be “very challenging” for the country as it seeks to reopen up to tourists while still battling with the pandemic, Nomura’s Chief ASEAN Economist Euben Paracuelles said on Thursday.

The country’s attempts to reopen its tourism destinations have not gone well, he told CNBC.

In July, Thailand started a so-called “sandbox” pilot scheme in Phuket, where tourists can visit the holiday destination without quarantining. But just a week after it reopened, it recorded one case — a tourist from the United Arab Emirates. By the end of the first week, it had 27 new cases, according to the Associated Press.

“So to be able to open up, I think (it) will be a very big struggle and they have very ambitious targets, they want to fully reopen by October. I think that’s probably too ambitious, probably not going to happen,” Paracuelles said. “And because of Thailand’s over reliance on tourism, I think that’s where the drive and the recovery will be coming from the most.”

https://www.cnbc.com/2021/07/26/asian-c ... -baht.html

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Re: Baht - Where is it going?

Post by Jun »

Gaybutton wrote:
Mon Jul 26, 2021 8:25 pm
It is hard to predict where all this is going, but it certainly seems to me things are going to get worse
It's certainly hard to predict.
Bear in mind, the current exchange rate is a market equilibrium, so for all the exchange rate market participants predicting a weaker baht, they will essentially be matched by the market participants predicting a stronger baht.
Those of us without superior insight into the foreign exchange markets might as well just conduct our affairs with the intention of reducing exchange rate risks as far as possible.

In the short term, Thailand might suffer from the pandemic. However, in the very long term, I see no reason for currencies like the USD or GBP to be strong. Both countries run large trade deficits and seem partial to printing money.
Now whilst a trade deficit can be run for a few decades, it is highly unlikely that a large trade deficit can be sustained for a few more decades.

However, I know that I don't know when exchange rates will move.

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Re: Baht - Where is it going?

Post by Undaunted »

Biggest decline among Asian currencies: https://www.cnbc.com/2021/07/26/asian-c ... -baht.html
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Re: Baht - Where is it going?

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First double-dip recession since 1998 looms

by Bloomberg News

29 July, 2021

Thailand will likely be the worst economic performer in Southeast Asia this year, with economists continuing to slash the country’s growth forecast amid surging Covid-19 infections, mounting political tensions and fading hopes for a tourism revival.

The Finance Ministry on Thursday cut its 2021 gross domestic product forecast to 1.3% growth, from the 2.3% it expected in April.

With new Covid infections and deaths continually breaking records since the latest surge began in April, some economists are flagging the possibility of a technical recession in the second half of the year, or even a second straight annual contraction, something the country hasn’t seen since the Asian Financial Crisis more than two decades ago.

According to the latest weighted average of 36 economists surveyed by Bloomberg, GDP should grow 1.8% this year. That’s particularly weak considering it’s a comparison to last year, when Thailand’s economy contracted 6.1%, the most in more than two decades.

"We see Thailand as a laggard in the region, penciling in the lowest GDP growth forecasts in Asean for both 2021 and 2022," said Charnon Boonnuch, an economist at Nomura Holdings Inc. in Singapore.

"Our forecast implies economic output will not return to pre-Covid levels before the third quarter of 2022, the slowest in Asean, partly reflecting the high dependence on foreign tourists," he added.

Bangkok and 12 other provinces, which account for more than half of the Thai economy, have been under lockdown and curfew since last week as the delta variant threatens to overwhelm the country’s public health system.

The Bank of Thailand has said the outbreak could shave as much as two percentage points off this year’s GDP if current measures fail to quell it and the pandemic endures for the rest of the year.

The Finance Ministry’s new forecast, which carries a range of 0.8%-1.8%, assumes Thailand will receive 300,000 tourists this year, a fall of 96% from last year. The ministry also expects the current lockdown to last just one month, and sees the outbreak peaking in August.

"We expect that exports and government spending will help support the economy and should prevent GDP shrinkage this year," said Kulaya Tantitemit, head of the ministry’s Fiscal Policy Office.

The ministry raised this year’s export forecast to 16.6% growth, from 11% predicted in April, as global demand recovers.

The baht is down 8.9% against the dollar so far this year, the worst performer among Asian currencies tracked by Bloomberg. The local currency was little changed at 32.875 to the dollar as of 12:54 p.m. local time. The ministry forecast the baht’s average level for the year at 31.48 per dollar.

Thailand reported 17,669 new infections and 165 deaths Thursday, both single-day records. Total cases rose to 561,030, of which 95% have come since the latest wave began in April, official data show. The Public Health Ministry expects the current wave to begin easing by October.

Thailand has administered about 16 million vaccine doses, enough to cover about 11% of the population, according to the Bloomberg Covid-19 Vaccine Tracker. The central bank, which previously expected the country to achieve herd immunity in the first half of next year, now says that milestone won’t be reached until after 2022.

"There’s now increasing chatter that the Thai economy will contract again this year," said Maria Lapiz, managing director of Maybank Kim Eng Securities Thailand. "There’s no reason for optimism."

The economic and health crises coincide with a rise in political unrest. The pro-democracy movement has returned to the streets in Bangkok after a six-month lull, with near-daily gatherings organised by different groups since June 24.

"We are in a severe crisis and our health system is on the brink of collapse," said Burin Adulwattana, chief economist at Bangkok Bank.

"The compensation programme is inadequate. More and more people are losing faith with the government, which led some of them to take to the streets. This can undermine the government’s stability and further damage confidence."

Troubled ‘Sandbox’

Prime Minister Prayut Chan-o-cha aims to allow more foreign arrivals from October, but infections are already rising in Phuket, a resort island that began a quarantine-free programme for vaccinated tourists in July.

That could threaten the goal of rescuing the tourism industry, which contributed one-fifth of Thailand’s economy before the pandemic and employed about 20% of its workforce.

The government planned a 1-trillion-baht borrowing programme last year to combat the pandemic and added another 500 billion baht this year amid the recent wave of infections. The cabinet approved a further budget of as much as 30 billion baht in mid-July to compensate businesses and workers affected by the latest restrictions.

The economy’s two remaining engines — government spending and exports — also face uncertainties. June exports rose 43.8% from the same period last year, the fastest pace in 11 years, in line with recovering global demand. Yet this growth driver may also be at risk if vaccination remains slow, an industry group warned.

"It’s hard to hang on to the hope that the country will re-open in October," Maybank’s Lapiz said, "or whether this re-opening — if it does happen — will make a big difference."

https://www.bangkokpost.com/business/21 ... 1998-looms

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Re: Baht - Where is it going?

Post by whitedesire »

One thing you have left out and that is China.. stocks have fell 20 odd percent since February due possibly to the geopolitical situation with the US

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Re: Baht - Where is it going?

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Re: Baht - Where is it going?

Post by Jun »

Where it has been.....
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Re: Baht - Where is it going?

Post by Gaybutton »

I'm no economics expert in any sense, but in my opinion where the baht has been might be nice for curiosity, but I don't see any relevance as to what to expect for the foreseeable future. As far as I'm concerned, the only silver lining on Thailand's current cloud is the exchange rate is improving for farang - not by much, but at least it's improving.

The reason I started this topic is because I am curious as to your opinions as to what is going to happen. Selfishly I wouldn't mind a full collapse of the baht, but I don't think that is going to happen. However, I would not be surprised if the exchange rate reaches 34 baht to the US dollar by the end of this year.

Everything is relative. When I first started going to Thailand, the exchange rate was around 25 baht to the US dollar. I remember when the exchange rate reached to around 45 baht to the US dollar and stayed there for quite some time. That was nice while it lasted. I remember a conversation with Geezer when he was very upset that the exchange rate went to 38 baht to the dollar. Now 38 baht to the dollar would be cause for celebration.

Of course even if the exchange rate would reach 100 baht to the US dollar, that would make little or no difference to my life since most of what would be of interest to me is closed. There wouldn't be anything to spend the money on. I'm not interested in buying anything. At my stage of the game, if there is anything I want, I've already got it.

So, what do you folks think? Where is this going and how long will it last? Feel free to guess.

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Re: Baht - Where is it going?

Post by whitedesire »

We've been here so many times, and the key word is confidence.

I do see things in the UK picking up dramatically which will influence the pound, but as you say GB be nice to have 100 to the dollar.

Remember the 90s when it hit around 90 at one point to the pound.

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Re: Baht - Where is it going?

Post by Jun »

whitedesire wrote:
Thu Aug 05, 2021 2:12 pm
Remember the 90s when it hit around 90 at one point to the pound.
Anyone who bought Thai stocks at the time would have done very nicely too.

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