Where is the Exchange Rate Going?

[Gaybutton]

What do you think is going to happen with the exchange rate? With all the publicity about the Bank of Thailand's recent interventions and the Thai stock market crash, I was expecting the baht to take a very hard hit. It hasn't happened, at least not yet. At the moment of posting this message, the exchange rate 36.29 baht to the US dollar.

 

That certainly is a difference since only a short time ago, the exchange rate nearly went below 35 to the US dollar. But from all the publicity I was expecting the baht to weaken considerably more than it has. I thought we might be seeing exchange rates getting close to 38 or 39 to the US dollar as a result.

 

What do you think is going to happen? I'll start off by saying I think the baht will weaken slightly more, and then stabilize. I don't foresee the baht falling below 37 to the US dollar any time soon.

[Bob]

Almost like predicting the weather.......hmmm......tomorrow will be light followed later by dark.....

 

Short-term prediction? Almost impossible. The US operating deficit and trade deficit continues to explode - meaning the dollar goes down against the other major currencies (with the thai baht being a tag-along to the yen and yuan and appreciating). On the other hand, the current thai government hasn't engendered great faith with anyone as yet and just blew a big one with international investors (who really count) - thus the thai baht depreciates to the dollar.

So.....if I had to take a guess.....the thai baht will fluctuate between 35 and 37 for the next 3 months.

 

Long-term prediction. Easy (I think). The thai baht will more closely follow the Chinese yuan which currently is about 40-50% undervalued. Absent a major economic crisis in Thailand, I sadly predict the thai baht will be about 27-28 baht to the dollar in 2 years. The only thing that makes me think that won't happen is that the Thai economy will tank by about the time the thai baht is about 32 to the dollar.

 

Best course of action? Cut your hair, give away everything you own, and retreat to a mountaintop temple. Then you won't give a shit what happens....

[Guest Hedda]

The short term is anyone's guess because it depends on what the sharks who have been doing all the speculating in the baht decide to do.If they smell blood in the water, sensing that the thais are sitting ducks for speculators, then the ride could get very bumpy for the Baht and the Thai economy.

 

Long term, the problem for Thailand is the big elephant in the middle of the room that no one wants to tackle: China and its cheap money and labor costs.

 

Thailand is between a rock (the dollar)and a hard place ( chinese yuan). As long as China keeps tight controls on its undervalued currency against the dollar, the Baht becomes progressively unable to compete with it and Thai exports become progressively less competitive in the world.

 

Without a vibrant and competitive export industry, Thailand's economy will most certain tank, as suggested by Bob. Just how Thailand manages to stay competitive with the Big Cheap Yuan is the question no one seems to have an answer for. The kind of currency regs they are playing with now may do more damage than good in the final analysis.

[Guest wowpow]

A 'feeling' for what will happen to currencies seems as reliable a way of forcasting as any. The rates will fluctuate that's for sure.

 

When all the dust dies down after the flurry, we have to face it that little has changed in broad terms. Thailand's action will discourage the massive flow of capital into the country and so depress the baht a little. But the Thai economy is strong and even if it falls back some in 2007 will remain so. The US seems to not care about the devaluing of the dollar. One wonders if it is deliberate policy to counter the low Yuan etc.

 

So my feeling is that the dollar will continue to slide slowly and the baht will remain much as at present. If one could 'know' what was to happen one could be very rich indeed.