oh oh this sounds ominousTHE BAHT DEBATE OVER CENTRAL BANK INTERVENTION
Economists call on BoT to rethink baht strategy
Experts: failing to act could cause a crisis
WICHIT CHANTANUSORNSIRI
The Bank of Thailand needs to rethink its currency management strategy and intervene to stem the baht's rapid rise to ward off a new economic crisis, say two leading economists. Virabongsa Ramangkura, a former deputy prime minister, said the central bank should intervene to push the baht down to 36 to the US dollar.
Interest rates should also be cut by one to 1.5 percentage points to reduce the cost of market intervention for new central bank bonds, he suggested.
The central bank's Monetary Policy Committee is expected to keep its one-day policy rate unchanged at 3.5% when it meets today.
But Dr Virabongsa argued that more aggressive action was needed to avert a crisis faced by exporters, who have seen the baht's appreciation over the past two years erode their price advantage.
''We are facing a crisis point right now if we stay still. The problems will spread from exporters to manufacturers and ultimately to the farmers,'' he said.
''We can't just continue to say that we need to adjust ourselves when we are at the edge of the cliff.''
Dr Virabongsa argued that the central bank needed to intervene in the foreign-exchange market to curb the baht's climb.
The government should also speed up refinancing of the country's foreign debt, now estimated at around $60 billion. Of that, private-sector debt accounts for $40 billion.
''If we can refinance our foreign debt with local obligations, it will reduce pressure on the currency while also strengthening the local bond markets,'' Dr Virabongsa said.
The baht was quoted yesterday at 33.33 to the US dollar, slightly weaker than 33.26 on Monday, as investors feared that the central bank was about to intervene decisively in the market.
The currency has gained 7.7% against the dollar since January as a result of strong current account surpluses and a global shift of funds into Asia and Thailand.
The Bank of Thailand has intervened sporadically in the market to smooth out the volatility in exchange rates, but has largely eschewed the more aggressive approach taken by other Asian countries, particularly China.
Central banks can intervene in the currency markets by buying foreign currency and issuing domestic bonds to help keep the monetary supply stable and inflation in check _ a process known as sterilisation.
But issuing bonds results in costs for the central bank as it must pay interest to bondholders.
Dr Virabongsa argued that the exchange rate was fluctuating not only due to trade, but also because international investors were moving capital.
''If we allow market forces to dominate, it just means that we will remain at the mercy of international hedge funds,'' he said at a briefing organised by the Export-Import Bank.
Dr Virabongsa said the central bank's monetary policy of setting interest rates to curb inflation came at the expense of employment.
''Between inflation and unemployment and factory closures, what should we choose? Economics is all about the science of choice,'' he said.
Factories in the textiles, agribusiness and garment sectors have come under threat due to the stronger baht.
While the US dollar value of the country's exports grew by a solid 18% in the first half of the year, the gains largely came from foreign-owned industries such as electronics and automobiles. Local industries reliant on domestic materials have mostly posted flat or declining export growth.
Dr Virabongsa said the government also needed to speed up public infrastructure investments to boost investor confidence and imports.
Narongchai Akrasanee, a former commerce minister and the current Exim Bank chairman, said the baht had appreciated by 19% against the dollar since January 2006, compared to just 15% for the Philippine peso, 8.9% for the Malaysian ringgit and 8.4% for the Singaporean dollar.
He said the deterioration in corporate balance sheets due to declining export sales revenues in baht terms was a huge concern for the economy.
''A balance sheet crisis means death for companies. You can try any medicine and the patient still won't recover,'' Dr Narongchai said.
He noted that the central bank's single-lending limit, which restricts total loans offered to a single customer to minimise potential risk to a bank's portfolio, had complicated efforts by companies to refinance foreign debt.
The National Legislative Assembly should also speed up passage of new laws, including a public debt management law, to give authorities greater flexibility in issuing bonds to manage public debt, Dr Narongchai said.
But not all economists agreed with the concept of heavy market intervention.
Somphob Manarungsan, an economist at Chulalongkorn University, said that massive central bank intervention was risky for the economy.
Reducing interest rates simply to lower the central bank's sterilisation costs would introduce other problems for the economy, he said.
Dr Somphob said that instead, regulations should be eased to allow Thai companies and individuals to hold foreign currency in the domestic market.
Baht What up with Dat?????
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izzix
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Double yes, look at the more aggressive action. 
Analysis:Finance, banking officials blamed
Noted economist Virabong-sa Ramangkura rarely speaks. But when he does, he upsets a lot of people.Published on July 18, 2007
At an economic seminar yesterday at the Export and Import Bank of Thailand, Virabongsa terribly upset the finance and banking authorities by directly blaming them for their failure to find an appropriate foreign-exchange policy to maintain the competitiveness of Thai exports. He even called on Prime Minister Surayud Chulanont to take the matter into his hands by devaluing the baht, in order to prop up the Thai economy. The Monetary Policy Com-mittee of the Bank of Thailand (BOT) is scheduled to meet today to discuss interest-rate policy. Most analysts expect the central bank to keep its policy rate unchanged at 3.5 per cent, although some economic houses expect the banking authorities to trim the rate another 0.25 percentage point to 3.25 per cent.
But Virabongsa warned
the pill would not be strong enough to shock the financial markets. He would like the banking authorities to pull the financial markets backward abruptly by targeting the baht at 36 to the US dollar, as opposed to the current rate of slightly more than 33. A combination of a steep rate cut and fierce foreign-exchange intervention is necessary to turn the tide, which he considers to be teetering on an exchange-rate crisis.
On Sunday, Olarn Chaipra-vat, another prominent economist, called for the BOT to formulate its foreign-exchange policy, to avert the baht crisis. He suggested the central bank set a yearly target for the baht exchange rate, so that it did not fluctuate too widely compared with regional currencies that are Thailand's competitors.
Both Finance Minister Chalongphob Sussangkarn and BOT Governor Tarisa Watanagase have come out with a half-hearted defence. They insist they will not resort to the old-fashioned practice of fixing the baht, as suggested by both Virabongsa and Olarn.
However, if both do nothing, the baht will continue to rise from both capital inflows and Thailand's current-account surplus to 30 to the dollar and wreak havoc on Thai exports. The movement of the baht is a one-way street now, because there is more money flowing into the country than the other way around.
The BOT has also been reluctant to intervene in the foreign-exchange market to keep the baht weak, for fear of losing money from the intervention.
However, all of the other countries in the region, from Japan and China to Malaysia and Singapore, are defending their currencies fiercely, in order to promote their exports and keep their economies competitive.
Virabongsa said the central bank had been too occupied with high inflation and thus kept interest rates rather high, to reduce price pressures.
"Economics is the science of making a better choice, and we have to choose inflation rather than allow firms to go bankrupt and see massive unemployment," he added.
After the sharp rate cut, the central bank and Finance Ministry must cooperate closely in exchange-rate intervention by buying large-enough amounts of dollars from the market, he suggested.
Market intervention may cause the BOT to lose more money, because it must issue bonds to absorb baht from the market. However, a lower interest rate for the baht would result in less loss or even a profit, in case the dollar interest rate became higher than the baht rate.
He said the central bank had lost Bt100 billion in market intervention last year, because its operation was not big enough to change the mood of the market from a stronger to a weaker baht, he said.
He also urged the Finance Ministry quickly to facilitate baht-bond issues.
"When I was adviser to former finance minister Thanong Bidaya, the Fiscal Policy Office often hesitated to approve central-bank requests for issuing more bonds. I told Thanong to give faster approval," he said.
He said once the interest rate was much lower, it would encourage private firms to convert their foreign debts, estimated at about $40 billion, to baht. At the same time, the prime minister must ask all state enterprises to refinance their foreign debt or swap foreign debts estimated at $10 billion into baht debt, he said.
He also urged the government to accelerate investment in mega-projects, which require imported materials, and create an expectation that the country needs more foreign currency to finance infrastructure projects.
Virabongsa believes his suggestions will be more effective in stemming the baht rise than those measures the central bank plans to announce of allowing firms to invest abroad and for individuals to hold foreign-currency accounts.
The BOT measures will not work. People will not want to invest abroad, because they would have to risk losses caused by the rising baht. Even those who have invested in foreign stock markets may already have lost money from a sharp rise in the exchange rate, he said.
He urged the BOT to cancel its capital-control measure imposed last December. The 30-per-cent reserve requirement has distorted the market by creating two exchange-rate markets between Singapore and Bangkok. While the central bank believed the baht's offshore rate would move closer to its onshore rate, the opposite phenomenon has happened, with the baht in the domestic market growing closer to the offshore rate in Singapore. Worse still, the baht rate in Singapore appreciates even further, he said.
Virabongsa said he agreed with Olarn, an adviser to the Fiscal Research Institute, who said on Sunday that the BOT should target the level at which the baht should be.
He rejected the stance of the BOT and the Finance Ministry that the Kingdom should not fight against the market and that exporters should adapt themselves to the appreciating currency. "This perception has encouraged hedge funds - which played a great role in the 1997 baht crisis - to speculate in the baht," he claimed.
Virabongsa said it was easier to make the argument that the country depended too much on export sectors, which account for 60-70 per cent of gross domestic product, but to reduce export dependence also means to cut imports, he said.
A small country like Thailand needs to import goods, due to limited resources, and as a smaller market, production could quickly flood the domestic market. That is why the country need exports, he explained and then cited Japan's past experience.
"During the 1960s, the Japanese government adopted the motto: 'We [Japan] have only people, mountains and sea, so export or die'," he said.
Narongchai Akrasanee, chairman of the Export-Import Bank of Thailand, which organised yesterday's forum for Virabongsa to speak to the press, recalled that the current situation was similar to what happened a year before the 1997financial crisis. The critics then - including Virabongsa - urged the central bank to abolish the basket-currency regime, while the BOT tried to defend the baht from depreciation. The difference this time is that a stronger baht will be easier to manage than a weak baht, he said.
He said a series of public forums had been organised since Sunday for experts to voice their concern about the currency. Noted economists, the Thai Chamber of Commerce, the Federation of Thai Industries and the Thai Bankers' Association have all tried to inform the government that the current situation was unacceptable.
Narongchai showed a graph of exchange rates against the dollar in the region and euro zone from January 3 to last Friday. During that time, the baht rose 18.9 per cent, followed by the Philippine peso (15.1 per cent), the euro (13.1 per cent), the ringgit (8.9 per cent), the South Korean won (8.6 per cent), the Singaporean dollar (8.4 per cent), the rupiah (8.1 per cent) and the yuan (6.2 per cent). Among currencies that fell relative to the US dollar, the Hong Kong dollar dropped 0.8 per cent, the yen 0.6 per cent and the Taiwanese dollar 0.5 per cent.
Wichit Chaitrong,
Thanong Khanthong
Analysis:Finance, banking officials blamed
Noted economist Virabong-sa Ramangkura rarely speaks. But when he does, he upsets a lot of people.Published on July 18, 2007
At an economic seminar yesterday at the Export and Import Bank of Thailand, Virabongsa terribly upset the finance and banking authorities by directly blaming them for their failure to find an appropriate foreign-exchange policy to maintain the competitiveness of Thai exports. He even called on Prime Minister Surayud Chulanont to take the matter into his hands by devaluing the baht, in order to prop up the Thai economy. The Monetary Policy Com-mittee of the Bank of Thailand (BOT) is scheduled to meet today to discuss interest-rate policy. Most analysts expect the central bank to keep its policy rate unchanged at 3.5 per cent, although some economic houses expect the banking authorities to trim the rate another 0.25 percentage point to 3.25 per cent.
But Virabongsa warned
the pill would not be strong enough to shock the financial markets. He would like the banking authorities to pull the financial markets backward abruptly by targeting the baht at 36 to the US dollar, as opposed to the current rate of slightly more than 33. A combination of a steep rate cut and fierce foreign-exchange intervention is necessary to turn the tide, which he considers to be teetering on an exchange-rate crisis.
On Sunday, Olarn Chaipra-vat, another prominent economist, called for the BOT to formulate its foreign-exchange policy, to avert the baht crisis. He suggested the central bank set a yearly target for the baht exchange rate, so that it did not fluctuate too widely compared with regional currencies that are Thailand's competitors.
Both Finance Minister Chalongphob Sussangkarn and BOT Governor Tarisa Watanagase have come out with a half-hearted defence. They insist they will not resort to the old-fashioned practice of fixing the baht, as suggested by both Virabongsa and Olarn.
However, if both do nothing, the baht will continue to rise from both capital inflows and Thailand's current-account surplus to 30 to the dollar and wreak havoc on Thai exports. The movement of the baht is a one-way street now, because there is more money flowing into the country than the other way around.
The BOT has also been reluctant to intervene in the foreign-exchange market to keep the baht weak, for fear of losing money from the intervention.
However, all of the other countries in the region, from Japan and China to Malaysia and Singapore, are defending their currencies fiercely, in order to promote their exports and keep their economies competitive.
Virabongsa said the central bank had been too occupied with high inflation and thus kept interest rates rather high, to reduce price pressures.
"Economics is the science of making a better choice, and we have to choose inflation rather than allow firms to go bankrupt and see massive unemployment," he added.
After the sharp rate cut, the central bank and Finance Ministry must cooperate closely in exchange-rate intervention by buying large-enough amounts of dollars from the market, he suggested.
Market intervention may cause the BOT to lose more money, because it must issue bonds to absorb baht from the market. However, a lower interest rate for the baht would result in less loss or even a profit, in case the dollar interest rate became higher than the baht rate.
He said the central bank had lost Bt100 billion in market intervention last year, because its operation was not big enough to change the mood of the market from a stronger to a weaker baht, he said.
He also urged the Finance Ministry quickly to facilitate baht-bond issues.
"When I was adviser to former finance minister Thanong Bidaya, the Fiscal Policy Office often hesitated to approve central-bank requests for issuing more bonds. I told Thanong to give faster approval," he said.
He said once the interest rate was much lower, it would encourage private firms to convert their foreign debts, estimated at about $40 billion, to baht. At the same time, the prime minister must ask all state enterprises to refinance their foreign debt or swap foreign debts estimated at $10 billion into baht debt, he said.
He also urged the government to accelerate investment in mega-projects, which require imported materials, and create an expectation that the country needs more foreign currency to finance infrastructure projects.
Virabongsa believes his suggestions will be more effective in stemming the baht rise than those measures the central bank plans to announce of allowing firms to invest abroad and for individuals to hold foreign-currency accounts.
The BOT measures will not work. People will not want to invest abroad, because they would have to risk losses caused by the rising baht. Even those who have invested in foreign stock markets may already have lost money from a sharp rise in the exchange rate, he said.
He urged the BOT to cancel its capital-control measure imposed last December. The 30-per-cent reserve requirement has distorted the market by creating two exchange-rate markets between Singapore and Bangkok. While the central bank believed the baht's offshore rate would move closer to its onshore rate, the opposite phenomenon has happened, with the baht in the domestic market growing closer to the offshore rate in Singapore. Worse still, the baht rate in Singapore appreciates even further, he said.
Virabongsa said he agreed with Olarn, an adviser to the Fiscal Research Institute, who said on Sunday that the BOT should target the level at which the baht should be.
He rejected the stance of the BOT and the Finance Ministry that the Kingdom should not fight against the market and that exporters should adapt themselves to the appreciating currency. "This perception has encouraged hedge funds - which played a great role in the 1997 baht crisis - to speculate in the baht," he claimed.
Virabongsa said it was easier to make the argument that the country depended too much on export sectors, which account for 60-70 per cent of gross domestic product, but to reduce export dependence also means to cut imports, he said.
A small country like Thailand needs to import goods, due to limited resources, and as a smaller market, production could quickly flood the domestic market. That is why the country need exports, he explained and then cited Japan's past experience.
"During the 1960s, the Japanese government adopted the motto: 'We [Japan] have only people, mountains and sea, so export or die'," he said.
Narongchai Akrasanee, chairman of the Export-Import Bank of Thailand, which organised yesterday's forum for Virabongsa to speak to the press, recalled that the current situation was similar to what happened a year before the 1997financial crisis. The critics then - including Virabongsa - urged the central bank to abolish the basket-currency regime, while the BOT tried to defend the baht from depreciation. The difference this time is that a stronger baht will be easier to manage than a weak baht, he said.
He said a series of public forums had been organised since Sunday for experts to voice their concern about the currency. Noted economists, the Thai Chamber of Commerce, the Federation of Thai Industries and the Thai Bankers' Association have all tried to inform the government that the current situation was unacceptable.
Narongchai showed a graph of exchange rates against the dollar in the region and euro zone from January 3 to last Friday. During that time, the baht rose 18.9 per cent, followed by the Philippine peso (15.1 per cent), the euro (13.1 per cent), the ringgit (8.9 per cent), the South Korean won (8.6 per cent), the Singaporean dollar (8.4 per cent), the rupiah (8.1 per cent) and the yuan (6.2 per cent). Among currencies that fell relative to the US dollar, the Hong Kong dollar dropped 0.8 per cent, the yen 0.6 per cent and the Taiwanese dollar 0.5 per cent.
Wichit Chaitrong,
Thanong Khanthong
My thoughts things are not looking real good, The can't agree on an approach, o moer hen likely inaction will be the order of the day. The writer is correct they should have been on top of this long ago.
BOT to unveil fresh curbs
Chalongphob rejects calls for a big cut in interest ratesPublished on July 18, 2007
Finance Minister Chalongphob Sussangkarn rebutted calls from a top economist yesterday for a sharp cut in interest rates to stem the baht's rise, but said other measures were being considered.
Visit Thanong Khanthong's blog to see his series on 1997 crisis
Chalongphob countered the call by renowned economist Virabongsa Ramangkura for a 1 to 1.5 percentage point cut in the Bank of Thailand's policy rate, saying lower rates were not a panacea to stop the baht appreciating.
"We need more tools as domestic rates are near bottom levels, while interest rates globally are about to head up," he said, signalling that the central bank's Monetary Policy Committee may not cut the policy rate at its meeting today.
He said the Bank of Thailand would announce additional measures, which include an extension of the dollar holding period as well as deposits of foreign currencies at domestic banks.
"We need to carefully consider the measures and their possible impacts on potential outflows in the future. We have sufficient tools, and this will not cause an economic crisis like in 1997," he insisted.
Virabongsa called yesterday for the Bank of Thailand to avert a looming economic crisis by slashing its policy rate today.
It should then target a baht exchange rate of Bt36 to the US dollar, he said.
Speaking at an economic seminar at the Export Import Bank of Thailand, Virabongsa also urged Prime Minister Surayud Chulanont to assume a hands-on approach to avert a potential crisis from the strong baht.
His suggestions followed the fast appreciation of the baht against the US dollar, buoyed mainly by inflows to the stock exchange.
The baht closed slightly weaker last night at 33.33 to the dollar, down from 33.26-28.
Last week, the dollar fell to Bt33.18 onshore - its lowest level since August 1997. It is down from Bt34.53 at the end of June and from around Bt36 at the end of last year.
There are fears that many small and medium-sized export businesses could be driven out of business, following the near closure of Thai Silp South East Asia Import Export Co Ltd, a large local garment manufacturer.
The Cabinet yesterday set up a committee which will specify guidelines and solutions for factory closures. Deputy Prime Minister and Industry Minister Kosit Panpiemras is chairman of the panel.
Kosit said after the Cabinet meeting the government recognised that the rise of the baht was an urgent problem that needed solving.
He is due to meet tomorrow with Chalongphob and Bank of Thailand Governor Tarisa Watanagase to discuss the baht. He would also discuss the issue at an economic steering committee made up of private associations and academics. Suggestions would then be forwarded to the Cabinet next Tuesday.
"The prime minister insisted that if any factory has to shut down, employees' benefits must be protected. We will be alert and find new measures to ensure the baht does not fluctuate. Interest rates tend to head downward, but not steeply," Kosit said.
In his speech, Virabongsa warned that without strong political will to resolve the baht crisis, it could lead to a domino effect, hitting exporters, local firms, farmers, labourers and financial institutions. The appreciation of the baht must be considered an urgent national concern.
"We are having a baht crisis now," he said. "The issue is beyond the capacity of the Bank of Thailand and the Finance Ministry to resolve alone.
"Effective action from the government is needed in order to break market expectation that the baht will appreciate further," Virabongsa said.
He blamed bank authorities for failing to tackle the exchange rate issue over the past two years during which the baht was at Bt40-Bt41 to the US dollar at the end of 2005, Bt35 at the end of 2006 and slightly above Bt33 at the present. If left untouched, the baht could rise further and erode overseas markets for Thai exports.
Virabongsa is well known for his alternative views. In 1997, he correctly urged Thai authorities to devalue the baht to prop up exports and lead Thailand out of the financial crisis.
The economist has proposed solutions of sharp cuts in interest rates, plus the central bank buying large amounts of dollars, converting foreign debt into baht debt and accelerating investment in mega-projects.
"The central bank should cut the policy rate by one percentage point or 1.5 during the Monetary Policy Committee meeting [today], and the central bank should target the baht at Bt36 to the US dollar from the current Bt33 level," he suggested.
Chalongphob, however, said an interest rate cut might not have much effect in slowing capital inflows, which have recently shifted largely into Thai equities.
Most economists expect the Bank of Thailand to leave its key policy rate unchanged at 3.5 per cent. The rate has already been cut 150 basis points so far this year.
Chalongphob said the government was working on ways to boost demand for the US dollar.
"The recent rise of the baht was caused partly by an absence of dollar demand," he said. "Greater dollar demand would lessen the need for the central bank to manage [the baht in the foreign exchange market]."
One thing about Thailand is it will not except responsibility, If they would have just look even a far as a novice such as myself, they woudl know that t Thailand leads in the increase of rate of exchange other countries have doen much better in the region
Thai Minister of Finance calls on Asian nations to cooperate in maintaining currency stability
The Minister of Finance is calling on Asian nations to cooperate in managing the stability of their respective currencies.
Minister of Finance Chalongpob Sussangkan conducted a speech on the occasion of the 10th anniversary of the Asian financial crisis. Mr. Chalongpob said that despite the depreciation of the US dollar currency due to an influx of investment in the Asian region, officials will put their full effort into maintaining the stability and efficiency of Asian currency exchanges.
The Minister of Finance revealed that the Asian region has the highest foreign reserve in the world, valued at $3 trillion. Careful management is cited as necessary to maintain the stability of currencies in the Asian region. Mr. Chalongpob said that the present currency situation is different from the Asian financial crisis of 1997 in which a large amount of short term non-performing loans flowed into Asian nations.
The Minister of Finance affirms that Asian nations now maintain a sizeable foreign reserve in order to counter such occurrences.
Source: Thai National News Bureau Public Relations Department - 18 July 2007
I guess this guy must gave missed the meeting with the PM yesterday. Note a news release from the Smoke and Mirrors Department
[quote]
Minister of Commerce: current surge in baht is not at critical level
Minister of Commerce, Mr. Krirk-krai Jirapaet has affirmed that the current baht crisis is not at its critical level. He also indicates that a reduction of interest rates could not help improve the situation.
Mr. Krirk-krai said that the situation is not as severe as the value for money in other countries in the region, including Philippines, Malaysia, and Indonesia has also increased. He viewed that Thai private sector should try to develop the quality of products so they can gain higher profits. He believes that if they are able to adjust their businesses in line with the situation, they can handle the strengthening of baht currency easily.
At the same time, the government is considering to set up a fund to promote Thai businesses in foreign countries.
Japan is confident in Thailand
[quote]
Minister of Commerce: current surge in baht is not at critical level
Minister of Commerce, Mr. Krirk-krai Jirapaet has affirmed that the current baht crisis is not at its critical level. He also indicates that a reduction of interest rates could not help improve the situation.
Mr. Krirk-krai said that the situation is not as severe as the value for money in other countries in the region, including Philippines, Malaysia, and Indonesia has also increased. He viewed that Thai private sector should try to develop the quality of products so they can gain higher profits. He believes that if they are able to adjust their businesses in line with the situation, they can handle the strengthening of baht currency easily.
At the same time, the government is considering to set up a fund to promote Thai businesses in foreign countries.
Japan is confident in Thailand
All in one day now I thought these guys were so worried about losing face, how embarrasssing this must be. These hguys need to get on the same page. If I were the PM that would be happening sooner rather then later. This l kind of activity makes them really look like they don't have a clue about what country they are in.
Thailand cuts benchmark rate
(BangkokPost.com) - The Bank of Thailand announced a policy rate cut by 25 basis points to 3.25 percent on Wednesday in an effort to rein the baht.
The decision, which was made at a Monetary Policy Committee meeting, came after Deputy Prime Minister and Industry Minister Kosit Panpiemras said on Tuesday that there was "room for interest rates to fall futher."
It is the fifth consecutive rate cut this year in a bid to help business operators suffering as a result of the sharp baht rise.
"The policy rate cut will help halt the baht's appreciation," Suchada Kirakul, an assistant to central bank governor, told reporters.
She said the controversial capital controls will stay in place, adding that a package of measures to be proposed to the government to rein the baht would involve capital outflows, not capital controls.
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JimboPSM
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Well spotted Ray, got to admit this one surprised me, I thought they had reached their low rate (in the current climate of higher interest rates) at their May meting.
Hopefully it will be enough to help relieve the pressure, but in taking this measure now it leaves little or no headroom to use this measure in the future.
The full text of the BoT decision:
[quote]No. 32/2007
Monetary Policy Committee
Hopefully it will be enough to help relieve the pressure, but in taking this measure now it leaves little or no headroom to use this measure in the future.
The full text of the BoT decision:
[quote]No. 32/2007
Monetary Policy Committee
Is this a step in the right direction?
The NationGovernment foreign debts to be refinanced
The Ministry of Finance and Thailand's state enterprises plan to refinance or repay external debt of US$3.183 billion by the end of 2007, as part of the government's plan to weaken the baht.
Deputy Finance Minister Sommai Phasee said that the refinancing will save the borrowing costs by Bt20-Bt30 billion.
The move is part of the government's attempt to ease appreciation pressure on the baht, Sommai said.
Until the next 4 months, at least 80 per cent of the borrowings would be refinanced while the rest will be done before end-2007.
"This is a measure to stem the baht rise. Personally, I think dollar should weaken further. Thus, more measures could be required," he said.
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Yeah!!! Gold is up to $US672 po. But, the $US is just holding 80 on the index.
So the rise in the $AU to 87.76 and golds rise is more to do with the real weakness in the $US than any appreciation of either. Same same for the Baht??
Nice surprise at 3am and a cuppa to see Gold up $10 in one hit, will have to wait for consolidation. If it heads over $US700 po the $US is a goner and the Baht to 25.
(interest rate cut or not)
cheers.
But, the $US is just holding 80 on the index. So the rise in the $AU to 87.76 and golds rise is more to do with the real weakness in the $US than any appreciation of either. Same same for the Baht??
Nice surprise at 3am and a cuppa to see Gold up $10 in one hit, will have to wait for consolidation. If it heads over $US700 po the $US is a goner and the Baht to 25.
(interest rate cut or not)
cheers.
nevket How could you say US is a goner did you ever hear about fort knox in kentuckey that is in the USA the usa has enough gold to bulld another tunnel under the english channel made of gold LOL and that is only what we mined we have mountains of it in Alaska Arizona & Nevada that has not been mined
I guess the speculators are tired of the Thai baht now they shifted to gold
nevket if the thai baht go to 25 it will wreck the country you see factories are closing there doors at 32.90 and the Thai goverment does not know what to do about it 5 different people have 5 different answer when the correct answer is dump the USD they have in reserve and spend it on infrastructure of thailand and you will see the baht weaken a little maybe go to 36 or 37 I want it to go to 40 as for gbp you are getting 2usd to 1 gbp that a good return for you
I guess the speculators are tired of the Thai baht now they shifted to gold
nevket if the thai baht go to 25 it will wreck the country you see factories are closing there doors at 32.90 and the Thai goverment does not know what to do about it 5 different people have 5 different answer when the correct answer is dump the USD they have in reserve and spend it on infrastructure of thailand and you will see the baht weaken a little maybe go to 36 or 37 I want it to go to 40 as for gbp you are getting 2usd to 1 gbp that a good return for you
Published on July 19, 2007
The Finance Ministry will soon unveil a package of measures to rope in the runaway baht, as proposed by
the Bank of Thailand, which yesterday surprised the market by cutting its policy in-
terest rate sooner than ex-pected in the face of relent-
less pressure on the Thai currency.
"I can't say how to solve this problem right now, but necessary steps will become more obvious on Tuesday," Deputy Prime Minister and Industry Minister Kosit Panpiemras said yesterday ahead of his meeting today with Finance Minister Chalongphob Sus-sangkarn and Bank of Thailand Governor Tarisa Watanagase.
The action plan is expect-
ed to include some of the
ideas raised by the Joint Public/Private Committee earlier this week.
While the dollar-holding period for ex-porters could
be lengthened, local companies and individuals could also be encouraged to invest overseas.
In moves to increase baht liquidity, the Finance Ministry introduced a policy to refinance foreign currency-denominated loans worth US$3.18 billion (Bt106.5 billion) with baht loans and approved the issuance of Bt26.9 billion baht bonds by six foreign financial institutions.
The baht ended weaker at Bt33.42/50 against Tuesday's closing of Bt33.33/35. The Stock Exchange of Thai-
land Index also dropped
0.86 per cent to 849.56, on turnover of Bt24.6 billion.
Ammar Siamwalla, an
economic policy authority
and honorary adviser to
the Thailand Development Research Institute, cast doubts on the effectiveness of the package. "They are hedge funds which possess huge
sums of money. How can we fight them?"
Wisit Tantisunthorn, secretary-general of the Government Pension Fund, also cautioned investors who are about to explore overseas opportunities to beware of the high risks, particularly when the measures fail to weaken the baht.
"So far, many investors have posted losses from such investment, as the baht keeps strengthening and that can't be offset by the returns on foreign assets," he said. Still, the fund's overseas portfolio has netted huge gains and the details would be revealed today, he said.
Deputy Finance Minister Sommai Phasee said the government and state enterprises plan to refinance or repay external debts by the end of the year.
"The refinancing will save Bt20 billion-Bt30 billion in borrowing costs [due to the foreign-exchange gains]," he said.
Over the next four months, at least 80 per cent of the debts would be refinanced while the rest would be covered before year-end.
"This is a measure to stem the baht rise. Personally, I think the dollar should weaken further, so more measures could be needed," he said.
The government could refinance its yen loans worth $690 million, he said.
The Transport Ministry has been asked to rush state enterprises under its supervision into following the conversion policy, and the ministry was expected to discuss this today, he said.
The State Railway of Thailand is one of the Transport Ministry's state enterprises that could swap debts into baht in a fast manner. The SRT has borrowed Japanese yen, equivalent to $1.27 billion, from the Japan Bank for International Cooperation. The refinancing would reduce the debt burden by Bt11 billion, he said.
Another state enterprise that is ready is Airports of Thailand Plc, whose yen loans are equivalent to $546 million. TOT Plc's yen loans could be converted to baht as well as Thai Airways International Plc's $264 million loan to purchase two aircraft.
"When the payment comes due in October, it could pay for the aircraft in baht," Sommai said.
The Metropolitan Provincial Electricity could also substitute baht loans for its euro loans worth $75 million.
From early this year, the Public Debt Management office has converted $2.03 billion of foreign loans, he said.
The ministry also approved the issuance of Bt26.9 billion baht-denominated bonds.
The issuers are the Central American Bank for Economic Integration for Bt4.9 billion, International Bank for Reconstruction and Development, or World Bank, for Bt5 billion, International Finance Corp for Bt5 billion, Japan Bank for International Cooperation for Bt3 billion, KfW Bankengruppe for Bt4 billion and Nordic Investment Bank for Bt5 billion.
The baht bonds could help develop the local bond market, which expects foreign issuers' bond value to account for at least 5 per cent of the total market, and could weaken the baht, as these organisations would have to sell the baht to buy dollars.
nevket How could you say US is a goner did you ever hear about fort knox in kentuckey that is in the USA the usa has enough gold to bulld another tunnel under the english channel made of gold LOL and that is only what we mined we have mountains of it in Alaska Arizona & Nevada that has not been mined
Aznyron. please open this link and read the stats. The US has $11,000,000,000 in gold, supposedly. The US has debts of $8,900,000,000,000 at present and increasing by $1,300,000,000 per day.
http://www.brillig.com/debt_clock/
http://fms.treas.gov/gold/current.html
This situiation is not sustainable. The US is by far the largests debtor nation in history. The Gold in the ground is useless to the people of America as the US treasury regards Gold as just another rock. However they fear the intrinsic value of Gold so much that they manipulate the market to under cut the price. This is one of the false values of the $US.
The $US troubles started back in the late 60's and early 70's when the US could not print enough to satisfy spending needs as the $US was tied to the Bretton Woods Gold price of $35 per ounce. So, with not enough Gold to cover spending committments, Bretton Woods 2 was invented and the Gold standard dissolved.That is where you get the misinformation from that the $US is tied to ex amount of gold in store. It is not. And has not been so for 36 years.
A Federal reserve Note is nothing more than an IOU.
There are too many of them and this is the problem . Too many of anything reduces the intrinsic worth. eg. If you had millions of tonnes of Gold it would be worth a lot less than what it is now.
If the Baht is to continuing strengthening then the issue is one of Smart money leaving the weakening dollar and find an emerging market in the hope of profit.
The main reason behind the Bahts rise is the $$. It isn't really rising per se, rather the $$ is losing value.
Jimbo??
cheers.
LOL I guess I was wrong I do know about fed res. note has been used on our money for many years I remeber when they called in the silver citificate that was back in the 60 what year I do not remember any way the news of the baht today is 33.18 which is a sign that it is moving in the right direction now I hope
Cheers Ronnie
Cheers Ronnie
Sorry guys not from a reptubable source just village gossip, but I think painting a picture without smoke and mirrors, much closer to real life. It's the start of thread on Thai Visa. So nothing confirmed.
Under Issan Crisis?
I
Under Issan Crisis?
I
am hearing directly from the in-laws gossip about this person or that person here and there (and pretty much everywhere in Isaan) are in a desperate situation. The rainfall has not been enough to grow proper crops this year and a lot of families and entire villages have not had work most of the year. The lasses are leaving for Pattaya and the lads are scrounging for contruction work and odd jobs in Bangkok. Those who have land that isn't already re-mortgaged to the hilt are getting in way over their heads with unscrupulous lending practitioners. Those who have re-mortgage already are far behind in payments and there are lots of foreclosures.
The farmers and businesses that have been able to weather the storm thus far are still unable to make a profit because of the direct and domino affect of super-expensive (by Thai standards) fuel costs. There are even grumblings of Thais working for THB 120-150 per day getting replaced by Lao or Khmer workers who will do the same work for THB 80 per day. The economic difficulties of those countries are pushing more over the borders.
Sounds pretty grim as I hear it directly from the in-laws and other Thai friends in Isaan. Anyone on the ground (in Isaan only, please) care to comment?
Jimbo:
has Gold lost some of its relevance or has its relevance been debased by Central bankers seeking to remove it from the monetary system they seek to improvise and control? We tend to look through Western eyes at this issue. Try telling Indians or Chinese that Gold is irrelevant and they will disagree.
Personally, from my reading and investing, I think people will be scarred by the immediate future and the CBs will lose a lot of credibility. After all it was the CBs who bad mouthed Gold into being a "Barbarous relic" more so that public perception. IMHO
A lot of the US problems stem from the exporting of productive capacity. 70% of the economy is now based on services. As the Chinese yuan appreciates, $$ drops, the US will be importing inflation as well as goods they used to make and export. Changing bed linen and revolving dollars are not sound economics.
(the new wealth is an invention of printing $$ not a result of production and thrift)
The Thai are between a rock and a hard place. They are in a dynamic growth area but cannot exploit it because of their political dilemma. How they are to sort this out I do not know and will not hazard a guess on.
cheers.
has Gold lost some of its relevance or has its relevance been debased by Central bankers seeking to remove it from the monetary system they seek to improvise and control? We tend to look through Western eyes at this issue. Try telling Indians or Chinese that Gold is irrelevant and they will disagree.
Personally, from my reading and investing, I think people will be scarred by the immediate future and the CBs will lose a lot of credibility. After all it was the CBs who bad mouthed Gold into being a "Barbarous relic" more so that public perception. IMHO
A lot of the US problems stem from the exporting of productive capacity. 70% of the economy is now based on services. As the Chinese yuan appreciates, $$ drops, the US will be importing inflation as well as goods they used to make and export. Changing bed linen and revolving dollars are not sound economics.
(the new wealth is an invention of printing $$ not a result of production and thrift)
The Thai are between a rock and a hard place. They are in a dynamic growth area but cannot exploit it because of their political dilemma. How they are to sort this out I do not know and will not hazard a guess on.
cheers.
Well in one week the smoke cleared and the mirror broke, the reality was :
Thai Silp to be shut down Friday
Crisis-hit Thai Silp South East Asia Import Export Co Ltd has informed him of the decision to shut down the factory on Friday, Labour Minister Apai Chandanachulaka said Thursday. He said that the shutdown would be effective on August 7.
Owner of Thai Silp
"The company has the rights to discontinue the business. The government will then step in to ensure that employees receive legal compensations as well as relocating them to new plants. I believe that all 4,400 workers could have new jobs," he said.
He added that the government would not allocate any financial assistance to the company.
Thai Silp had earlier closed its business abruptly last week but decided to reopen the following day after receiving financial backing from the Thai Textile Institute.
It reinstate all of the nearly 5,000-strong workforce it laid off after its sudden closure on Wednesday.
The sudden closure was much publicised as some 200 factory workers protested and blocked traffic outside Samut Prakan City Hall against the closure.
The Industry Ministry has asked the institute to assess the health of the entire textile industry following Thai Silp's closure citing problems caused by the appreciation of the baht.
However the company that made sportswear for foreign markets decided to terminate the business on Friday after banks refused to give more lending.
from Thursdays "AGE"
[quote]
No going forward as the slide continues
Email Print Normal font Large font Ian Porter
July 19, 2007
Latest related coverage
Car jobs to go, but hope on new model
Engine that drove suburban dream machine eclipsed
Workers stuck between rock and hard place
Ford's foreign transplants
FORD'S decision to close its engine operations is another step in the gradual shrinking of the local automotive industry, which has mirrored the steady withdrawal of protection and the rise of imports since 1984.
The decline of local manufacturers has been so significant that some analysts are predicting that only GM Holden and Toyota might survive in the medium term. This would have a direct impact on the size of the components industry, which supports the assemblers.
In the past three years, Mitsubishi has closed its engine plant and makes just 12,000 cars a year, GM Holden has ceased its third assembly shift and Ford has cut its output.
Australia's car industry is the least protected in the world
[quote]
No going forward as the slide continues
Email Print Normal font Large font Ian Porter
July 19, 2007
Latest related coverage
Car jobs to go, but hope on new model
Engine that drove suburban dream machine eclipsed
Workers stuck between rock and hard place
Ford's foreign transplants
FORD'S decision to close its engine operations is another step in the gradual shrinking of the local automotive industry, which has mirrored the steady withdrawal of protection and the rise of imports since 1984.
The decline of local manufacturers has been so significant that some analysts are predicting that only GM Holden and Toyota might survive in the medium term. This would have a direct impact on the size of the components industry, which supports the assemblers.
In the past three years, Mitsubishi has closed its engine plant and makes just 12,000 cars a year, GM Holden has ceased its third assembly shift and Ford has cut its output.
Australia's car industry is the least protected in the world