What happened to the exchange rates?

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Jun

Re: What happened to the exchange rates?

Post by Jun »

Gaybutton wrote: Tue Dec 06, 2022 7:29 amI buy USD in Thailand, but find out that putting the dollars into a bank account in, say, Paraguay earns 5%. But how? Wouldn't I need a bank account in Paraguay in my name? Wouldn't I need to make a trip to Paraguay to open the account? Wouldn't I have to make sure it would be no problem to deposit money and withdraw money using something like Wise to do it?
1 The big banks and financial institutions have access to lots of international investment options.
2 Even mere mortals have easy access to some overseas investments. Some of my "cash" is actually held in a US Short Term Treasury ETF, which is traded in London. I buy that in GBP, with a very low spread. The people managing the ETF have to buy US treasuries, so anyone who buys this ETF creates demand for USD. When US interest rates go up, the interest rates on newly issued treasuries has to go up as well, otherwise no one buys them (at least the short term ones).
Your example of Paraguay is more difficult. Of course, rather than chasing a 8.5% interest rate there, with a huge amount of exchange rate risk, it would be preferable to invest in Thailand and reduce exchange rate risks.
Jun wrote: Mon Dec 05, 2022 11:04 pmWhat is propping up the baht until they know? After all, Thailand's tourist industry has been in real trouble for a long time now - and still is. I would have thought the baht would have lost an appreciable part of its value as a result, but apparently that hasn't happened.
Thailand was running a healthy trade surplus before covid, so was paying its way in the world. Which is more than the US or UK have been doing.
Even now, Thailand is only running a tiny trade deficit, measured as a percentage of GDP.
I see no reason at all for the Thai baht to weaken based on that.
Of more interest is Thai inflation. That picked up during the summer and AFAIK, Thailand hasn't increased interest rates to control it. I'm slightly surprised that hasn't led to weakening of the baht. I presume there is a genuine expectation that the inflation is transitory or that they will raise rates.
Also, when talking about exchange rates, bear in mind we are comparing Thailand against some highly indebted countries.
https://tradingeconomics.com/thailand/inflation-cpi
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