Baht Fundamentals

[Jun]

Wall Street is expecting a cut in rates next month. The stock market is already pricing it in.
Lower rates means a weaker dollar.

I agree. Also, the currency markets will already be pricing this in. Known information is already in the price.

Which is why predicting currency movements is too difficult for most of us.

[Undaunted]

[Undaunted]

[Jun]

The difference between this one and your post yesterday is just 0.32%.

Anyone living in Thailand and entirely reliant on an income in a foreign currency ought have a good safety margin on exchange rates. Such as being able to cope with a 40~50% fall in the rate over a few years.

[whitedesire]

They certainly have priced it in, but why is sterling so high against the dollar, 1.32 today as opposed to 1.24 a few weeks ago, but still the sameish against the baht, pretty static at 44-45 ish.

[gerefan]

They certainly have priced it in, but why is sterling so high against the dollar, 1.32 today as opposed to 1.24 a few weeks ago, but still the sameish against the baht, pretty static at 44-45 ish.

When I was in Thailand’s a few weeks ago it reached just under 47. I see it’s now only 44… big change in a few weeks.

[Dodger]

Just normal variation in a Global landscape.

THB to USD Avg. = 33 THB
With a range of 29 THB as a low - and 37 THB as a high. (applying plus/minus 3 statistical standard deviations).

This is the equation I used 6 years ago when planning for retirement which required me to look at Thailand's exchange rate data for the previous 40 years to determine the standard deviation. I then moved the low side of the range to 23 THB/USD just to be on the safe side (if memory serves me). So far - so good.

Personally I don't buy any financial predictions the "experts" make because globalization has created just too much variation (normal and abnormal variation) for anyone to know for sure what's going to happen. Common sense usually helps.

[Jun]

This is the equation I used 6 years ago when planning for retirement which required me to look at Thailand's exchange rate data for the previous 40 years to determine the standard deviation. I then moved the low side of the range to 23 THB/USD just to be on the safe side (if memory serves me).

This is rational and trying to be conservative. I like it.

I've seen the GBPJPY exchange rate vary significantly in the last 20 years. The highest rate is more than double the lowest. That's 2 G7 countries, but it still varied more than the GBPTHB rate. So I work on the basis that I would have to allow for such variation.

However, whatever we do is looking in the rear view mirror.
Ever since Nixon took the US off the gold standard 53 years ago, there has been a problem with increasing debt and debasement of currencies in many western democracies. Eventually that will reach a tipping point.

Whilst Thailand has less debt to gdp, they seem to have been increasing it in recent years.
Rather like China has been building infrastructure that no one uses, much of the Thai spending has gone on pointless infrastructure. Such as enormous railway stations that are not fit for purpose and elevated railway lines that don't provide a better rail service.
Or tunnels that they can't use.
Another board member pointed out the obvious & said metre gauge trains don't go above 160 km/h. They might be better off simply re gauging some of the track, rather pouring all that concrete.

[Undaunted]

[Gaybutton]

I have learned not to trust exchange rate predictions. Almost none of them ever turn out to be right. Nevertheless, here is the latest, which I take not with a grain of salt, but with an entire full shaker . . .
_________________________

Baht weakens as China falters

by Nareerat Wiriyapong and Nuntawun Polkuamdee

September 3, 2024

The baht led Asian currencies that weakened against the dollar on Monday on a faltering Chinese economy, with analysts suggesting the baht could be on a depreciating trend for the remaining months of this year if the US Federal Reserve (Fed) cuts rates by less than the 1% reduction anticipated by the market this year.

The baht slipped 0.5% to below 34.20 baht to the dollar on Monday, compared to the 13-month high of 33.85 last Friday, as emerging Asian currencies also weakened against the greenback. Regional bourses, including the Stock Exchange of Thailand (SET) edged lower on Monday as China's efforts to support its ailing economy failed to take hold.

The dollar advanced to its strongest level since Aug 21 against the yen, buoyed by a rise in long-term treasury yields to the highest level since mid-August after a closely watched measure of US inflation held steady, reducing the imperative for the Fed to cut rates by as much as 0.5% on Sept 18.

"The appreciation of the dollar and US bond yield is supported by higher probability that the Fed would slash US rates by only 0.25% this round, with the likelihood of a 50-basis-point [bps] dip getting lower," said Kanjana Chockpisansin, head of research, banking and the financial sector at Kasikorn Research Center (K-Research).

According to Ms Kanjana, the market has priced in that the Fed would lower rates by as much as 1% at its three remaining meetings of 2024. Consequently, if the reduction is less than anticipated, there might be a massive purchasing of US dollars, pushing the baht to weaken against the greenback for the rest of this year.

"If the Fed's statement from this month's meeting strongly suggests that it has concerns about inflation, the baht could weaken as the dollar gains strength," she told the Bangkok Post, adding that K-Research projects the baht to finish at 34.5 to the greenback this year.

Tisco Economic Strategy Unit (Tisco ESU) shares the same view about the impact of US rate cuts on the baht, while a Donald Trump victory in the US presidential election on Nov 5 could support dollar strength.

"Tisco ESU believes that the likelihood of a substantial cut, such as 50 bps at any given meeting, is low. This is because the US economy remains robust, and the Fed might only lower rates by 25 bps per meeting. Such a move could lead to a strengthening of the US dollar, putting pressure on the baht," said Komsorn Prakobphol, head of Tisco ESU.

Mr Trump's policies include increasing import tariffs on goods from China and other countries, which could raise prices and the rate of inflation. He plans to deport illegal immigrants, potentially driving up wages and production costs domestically, and reducing corporate and personal income taxes, leading to higher budget deficits and an increased issuance of government bonds.

"Should the Republican candidate be re-elected as president, his policies are likely to strengthen the dollar and weaken the baht for the rest of 2024 to a target of 34.5 to the dollar by the year-end," Mr Komsorn said.

Investors should closely monitor the Fed's meeting on Sept 18 and the US presidential debate on Sept 10 to gauge the direction of the baht for the remainder of the year, he added.

https://www.bangkokpost.com/business/ge ... na-falters