USD vs THB

[Guest lvdkeyes]

I changed money today and the rate of USD to THB was 32.41. Is the USD getting stronger or the THB getting weaker?

[Gaybutton]

I changed money today and the rate of USD to THB was 32.41. Is the USD getting stronger or the THB getting weaker?

I think it's a combination of both. I just don't understand at all how the exchange rates work. With all the problems in Thailand, what on earth keeps the baht so strong? Given the political climate, are investors really pouring that much money into Thailand?

[Guest doveman]

I think it's a combination of both. I just don't understand at all how the exchange rates work. With all the problems in Thailand, what on earth keeps the baht so strong? Given the political climate, are investors really pouring that much money into Thailand?

 

Well to put it simply, Thailand isn't a welfare state like Europe and the US. They may not make super computers but they don't have the mountain of debt to worry about that others do. So although there are issues the markets don't see them as being catastrophic.

[Guest fountainhall]

Thailand learned the hard way in 1997 that you can't just borrow ad infinitum. So the banks and the government coffers are far stronger this time around. Occasional variations are bound to take place, especially at the moment when the financial world seems terrified of a total collapse of the euro - hence the dollar is stronger (or so I glean from the financial news channels).

[Gaybutton]

the government coffers are far stronger this time around.

I wonder how much of a dent recovery from the riots and the near collapse of the tourist industry will put in those coffers.

[Guest]

Thailand learned the hard way in 1997 that you can't just borrow ad infinitum. So the banks and the government coffers are far stronger this time around. Occasional variations are bound to take place, especially at the moment when the financial world seems terrified of a total collapse of the euro - hence the dollar is stronger (or so I glean from the financial news channels).

 

Good point. The problem is weakness of some western currencies due to excessive borrowing (UK, US) or a combination of excessive borrowing plus economically flawed, temporary & unworkable currency union (Euroland). Printing money off like toliet paper does not help either.

 

The UK learned about excessive borrowing in the 1970s when the previous Labour government was bailed out by the IMF. That did not stop another Labour government being elected within 20 years and an almost criminal level of public borrowing following that.

The UK was borrowing over 3% of gdp at the height of the credit boom, which was grossly irresponsible and left us with nowhere to go during the global downturn.

 

As far as I can see, the US under George Bush had a similar problem with excessive borrowing. However at least the US more closely resembles a capitalist economy and has a higher gdp per capita.

 

The other point is trade deficits. The US, UK and some Euroland economies run large balance of trade deficits. I believe Thailand runs a small surplus.

 

In the very long run, trade has to balance & a fall in the value of western currencies is the most likely mechanism to achieve that.

 

More importantly, what can we do about it as individuals?

Well if you plan to spend 50% of your retired life in Asia, think about investing 50% of your pension fund & liquid assets there (probably diversified over several countries).

[kokopelli]

I changed money today and the rate of USD to THB was 32.41. Is the USD getting stronger or the THB getting weaker?

 

My opinion is the USD is getting stronger. Now, with the decline of the Euro, there are two great currencies in the world, the USD and the Chinese Yuan. The exchange rate of the dollar and the yuan remaina a straight line on a graph. All others float.

[Guest]

My opinion is the USD is getting stronger. Now, with the decline of the Euro, there are two great currencies in the world, the USD and the Chinese Yuan. The exchange rate of the dollar and the yuan remaina a straight line on a graph. All others float.

 

China chooses to fix its currency to the US$ at an artificially low rate which results in a huge trade imbalance and is ruining the economy of China's biggest rival on the planet. Why the US tolerates this is just beyond me. This does not make the US$ a great currency. My opinion is it's going down the toilet in the long term, due to the massive debts.

 

Fact: All other currencies do not float.

Many are fixed or have limited movement.

e.g.

HK$ to US$

Lithuanian Lita to Euro

Saudi Riyal to US$

[kokopelli]

I admit, I just made all that up about the dollar and the yuan as the reason for the dollar getting stronger! No doubt(in my mind) though that the Bank of Thailand is propping up the Baht to keep it at it's current exchange rate with the USD.

[mahjongguy]

No doubt(in my mind) though that the Bank of Thailand is propping up the Baht to keep it at it's current exchange rate with the USD.

 

- Why would they want to do that? Vietnamese rice is now cheaper in dollars than Thai rice and it's hurting Thailand's exports.

 

- The only way the BOT could prop up the baht vs. the dollar is by selling USD, and they don't hold enough USD to influence the exchange rate.

[Guest fountainhall]

The exchange rate of the dollar and the yuan remaina a straight line on a graph.

But it has not always been that way - and will not continue for much longer. It's not many years ago that the Yuan rose from it's long-held rate 8.28 to the US$ to its present 6.82. The Yuan now has to rise further, everyone agrees about that. The only question is when the Chinese government will allow it to start rising and what level will it eventually reach.

 

We should remember what happened in Japan. Around 1980, you could buy 260 Yen for US$1. Then the Reagan government put massive pressure on Japan to revalue. Within a year or so the Yen had started to rise. By 1990 it was 160 to the US$ and still rising. For the last few years it has hovered between about 90 and 110.

 

I spoke to a retired investment guru last week. Her view is that when the Yuan rises, there will be a great deal of pressure for Hong Kong to de-link from the US$ and to peg to the Yuan. She has no clients now but says for her own financial future she is presently buying both Hong Kong dollars and Chinese bonds.

 

I know little about finance but what she says does seem to make some sense in the long term. The HK$/US$ peg was introduced in 1983 at a time when the HK$ was going down the tubes due to Margaret Thatcher's attempted bullying of Beijing over Hong Kong after 1997. In the week before the peg, it fell by a full 10%. It was a temporary measure to stabilise the currency which has remained in force ever since. Once the Yuan is fully convertible, I think the HK$ must de-link.

 

I'll be interested in the views of those with more professional expertise.

[Gaybutton]

I'll be interested in the views of those with more professional expertise.

Only one problem. I have yet to see any economists who predict what the baht will do against the US dollar ever get it right.

[Guest fountainhall]

Only one problem. I have yet to see any economists who predict what the baht will do against the US dollar ever get it right.

Agreed, but I was referring to the Chinese Yuan (Renminbi) and HK$ where I have more faith in many of the predictions.

[Gaybutton]

Agreed, but I was referring to the Chinese Yuan

"The other day I ate so much Chinese food I went home and did the laundry."

- Bob Hope