Baht Downgraded

[Gaybutton]

The Thai banks have not reported the exchange rates online since April 10. The best I can come up with is what is showing on the Oanda site, that the current exchange rate is 35.66008 baht to the US Dollar.

 

The following article says the baht has been downgraded. I have very little understanding of economics and I don't have any idea what this means or where it will lead. Perhaps someone who understands these things can post a reply.

 

The following appears in the BANGKOK POST:

_____

 

Baht Downgrade 'Understandable'

 

Published: 15/04/2009

 

The downgrading of the baht's credentials from "A" to "A-" by Standard&Poor's was understandable in the wake of the Songkran holiday riots and the country will just have to live with it, Thai Chamber of Commerce adviser Arch Taolanont said on Wednesday.

 

Foreigners now saw increased investment risks, he said. The S&P downgrade would increase the cost of the government’s planned bond issues and and foreign loans it enters into. This also applied to the business sector, Mr. Arch said.

 

He expected Thailand’s rating would prove with a speedy restoration of both the economic and political scenes by the government.

 

Lifting the state of emergency as soon as possible would allay investors’ worries and boost confidence in the country. he said.

 

The international ratings agency lowered Thailand's local currency rating to "A-" from "A'' on Tuesday and said the outlook for the rating was negative, meaning it could be downgraded again.

 

The country's foreign currency rating was left unchanged at "BBB+" with a negative outlook.

[Guest shebavon]

I think it should mean 38 baht to the dollar, assuming continued strength being shown by the dollar. From what I see of the US Stock Market, that remains a better than even bet.

[Guest GaySacGuy]

Yahoo Finance is showing the baht at 35.415, so not much change there since Monday. 38 to the dollar sounds good to me though....bring it on!!

[Guest fountainhall]

Some Thai authority did suggest some weeks ago that the Baht would be allowed to fall to below 37 by year end. With the economy so dependent on exports and tourism, I reckon the government has no choice: it has to manage a downward valuation.

[Gaybutton]

The banks have started reporting the exchange rate again. Today, Thursday, April 16, the baht is holding steady right where it was before the trouble started. At the moment, 3:50pm, the exchange rate is 35.15 to the US Dollar.

 

Whether it will stay that way remains to be seen, but that's precisely where it was a week ago.

[Guest]

Whether it will stay that way remains to be seen

Even some quite successful investors have had trouble predicting exchange rate movements.

There are some famous quotes on the subject (but sadly not quite famous enough for me to remember who said them right at the moment ).

 

For years, the US & UK exchange rates have been at levels where both countries run horrific & unsustainable trade deficits. Then suddenly, the markets see sense & (for example) the Japanese Yen appreciates very quickly.

Even if an exchange rate is inappropriate & leads to unsustainable trade imbalances, it seems it can remain at such a level for years.

[mahjongguy]

The title of this thread is incorrect. The baht was not downgraded. The rating of Thai government bonds was lowered by S&P and Fitch but this only effects the attractiveness of those bonds.

 

Notes & reminders:

- Thai banks were not updating their exchange rates because they were closed for the holiday.

- The rate listed on a site like Oanda will always be higher that the bank rate, because it is the market rate, the average of buy and sell, and only applies to offshore currency swapping anyway. What matters to you is the Thai bank telex (buy) rate.

- The Thai government has very limited tools for manipulating exchange rates. If they feel that the baht is too strong they can lower interest rates. Or they can buy a bunch of USD and other currencies. But every action has side-affects that may cause problems of their own.

- When the baht gets expensive, as it has against the pound, it's painful and makes us want to blame someone, but the plain truth is that it's a marketplace. If people would rather hold Bulgarian leva than pound sterling then that's the way it will be. For a while. Until the next cycle comes round.