The Thai Baht

[semperfiguy]

The US Dollar has lost 72 satang against the Baht in just the past two weeks. It briefly hit 34.63 then fell rapidly to 33.91 today. That may not sound like much to some, but that's a 720 Baht loss on a $1000 exchange. I read a few weeks back that the Bank of Thailand predicted the Baht would trade at 34.60 by the end of June and continue to weaken till year's end, but now it's going in the opposite direction. The US stock market is at it's highest level ever and when that happens Gold usually loses value and the Dollar gets stronger. Does anyone care to speculate on what's happening?

[dingdong]

Donald Trump

[parrot]

After 40+ years of trying to figure out (beat) dollar/yen, dollar/won, dollar/NT, dollar peso, and dollar baht, I'm pretty much convinced the common man can't do it. Coups, riots, 9/11, wars, presidents, etc don't seem to have the effect you'd think they'd have.
Averaging things out (exchange once a month/quarter, for example) seems to be the best way to beat the odds.

[Laan Yaa Mo]

The Canadian dollar traded at 33 baht just a few years ago. The Thai Visa rate at this moment is 25.03 baht. The Canadian currency is going in the same direction as the Lao Kip in value.

[dingdong]

Cdn$ = USD$= Justin Tudeau = Donald Trump = DECLINE

[parrot]

Cdn$ = USD$= Justin Tudeau = Donald Trump = DECLINE

Using that logic, G. Bush led the Baht from 42 to 29 but Obama was good as the Baht went from 29 to 36......until Obama was bad and the Baht went back to 30 before it went back to 36. just sayin'

[dingdong]

Never look back always look forward this is why I say Trump at present and what we see in the future may be bring the $$$ Down
But thanks for the info

[Mosquito]

My thinking (for what it's worth), Thailand taking lessons from China in currency manipulation.

Question being.......once all/most of the govt big foreign purchases (subs/infrastructure agreements/additional military equipment) are completed will the baht return to the 36-38 range or higher.

On Trump, I might have to start buying rubles.

[arjay]

It's fluctuations in the stregnth of the dollar, rather than anything to do with the baht.

[PAPA Z]

Although there may be many other perceived factors regarding the strength or weakness of the US$, against other world currencies, the base causes of fluctuation pretty elementary.

When it comes to taking a position in the dollar, the currency trader needs to assess the different factors that affect the value of the dollar to try to determine a direction or trend. The methodology can be divided into three groups as follows:

Supply and demand factors
Sentiment and market psychology
Technical factors

[UdonThaniPete]

http://www.investopedia.com/articles/fo ... dollar.asp

[glalt]

The dollar continues to fall. Fortunately I made a rather large wire transfer a while back and got 35.2 baht per dollar. It appears that I should have wired more. Trump complained that the dollar was overvalued and that he would try to weaken it to make the US more competitive in the world market. That may be good for the country but it is not good for me.

[Lone Star]

For those who agonize over it so much, I would have thought that they knew "the investor's rule" when buying and selling currencies -- like the one glalt referred to and the one I regularly practice:

The old saying in investing is “Buy Low, Sell High.”

It also works the other way for currencies: “Sell High, Buy Low.”

When things started heading south for the USD, it was time to buy top quality, undervalued foreign assets at their record lows. It's why I always buy a little bit extra because the fluctuations usually come without warning. I did that "extra" swap enough times in the past when times were good that I don't much think about the currency exchange anymore between the Baht and the USD. I still do it, but I don't have to stay on top of it every month.

[FrazeeDK]

the Federal Reserve Board is scheduled to meet mid-June. It is fully expected they will raise the interest rate by at least 1-2 basisc points (.25% each).. That will likely bump the dollar back up to 35..

[glalt]

I shouldn't complain too much. During my first five years here, the exchange rate was 25 to a dollar. I got along then so I won't have any problem surviving now. One good thing was when I bought a condo, I got 41 baht to a dollar.

[JimboPSM]

The US Dollar has lost 72 satang against the Baht in just the past two weeks. It briefly hit 34.63 then fell rapidly to 33.91 today. That may not sound like much to some, but that's a 720 Baht loss on a $1000 exchange. I read a few weeks back that the Bank of Thailand predicted the Baht would trade at 34.60 by the end of June and continue to weaken till year's end, but now it's going in the opposite direction. The US stock market is at it's highest level ever and when that happens Gold usually loses value and the Dollar gets stronger. Does anyone care to speculate on what's happening?

Sorry for the delay in responding, but due to the high degree of volatility and noise that is being experienced in the foreign exchange markets I wanted a reasonable period of time to pass to try and minimise the distortions they create; additionally as I was almost certain that the Fed was going to increase the interest rate I wanted to be able to include its impact for additional context.

While the US stock markets are a reasonable barometer of opinion, they have a very poor record as being either a measure of the current state of the economy or as a predictor of the trajectory of the US economy – however, they are pretty good at telling you that the market has crashed ......... but only after it has crashed

In my opinion current stock market valuations have moved well into “bubble territory" - far too many valuations are based on discounting the impact of “proposed” cuts in the corporate tax rate (which legislatively haven’t really moved on from just being in a wish list).

In my opinion better measures of the current state of the economy can be found in the currency markets which are mainly based on supply and demand relating to the inflows and outflows of currencies, however, even better are currency indexes which additionally brings in data relating to the trade weighted value of the inflows and outflows – the frustration for me with trade weighted indexes is that the ones that I trust are not available in real time whereas major exchange rate are - when I want to see if a major exchange rate movement in the USD/THB is representative of what is actually happening to the international value of the USD I have to wait up to 8 days for the release of the data.

While I still monitor exchange rates I have shifted the emphasis of my research into the area of indexed currency values where I am seeing much closer correlations to underlying economic performance - unfortunately these are only available (and trustworthy) from major central banks.

I do not put any faith in movements of the value of gold, as a general rule I regard the gold price as an index of the irrational fears and gullibility of the tin foil hat brigade


Moving on to what may be the cause - over a number of years I have been pointing out that at times there have been some extremely poor (some might say non-existent) correlations between movements in the USD/THB exchange rate and the international value of the USD, particularly when compared to the relative performance of the Thai and US economies.

As such my initial expectation, both from your (SF) observations and from my initial review of the USD/THB movement data, was that the period you referred to was probably going to be just another period of divergence inside the current much larger and longer period of divergence which started at the beginning of July 2014.

However, when I actually compared the movement in the USD/THB rate with the movement in the US Dollar Indexes there was no compelling evidence to support it (illustrating the danger of jumping to conclusions on the basis of preconceptions instead of facts).

There was one period of two days (see yellow ellipse in chart below) where the USD/THB rate fell by almost 1%, which is indicative of the kind of movement that raises questions; however on closer inspection as it actually lagged the DTWEXM movement in my opinion it was just catching up with the indexed fall.

My conclusion about the recent fall of the USD/THB rate over the period reviewed is that, despite the very marked fall referred to above, there is actually a reasonable correlation with the movement in the international value of the USD.

This was especially so when compared with DTWEXM (my preferred measure of the international value of the USD) which I further cross checked with the separately calculated Bank of England Effective Exchange Rate Index for the USD - over the period of time reviewed movements of the Fed DTWEXM and the BoE USD EERI were virtually identical.

• This is a chart comparing the percentage movements of the USD/THB rate with those of the Fed US Dollar Indexes DTWEXM, DTWEXB and DTWEXO - all of which have been rebased to 12 May 2017 = 100%.
  

  

Note: clicking on the charts I have attached provide much larger and more easily read views.

So, having eliminated that the cause for this movement was a Thailand sourced divergence and that it did largely correlate to a fall in the international value of the USD then what we are left with is a period of pretty well universal negativity towards the USD – and that is despite 3 Fed interest rate increases since December 2016 (with the prospect of at least one more in 2017).

Now what on earth could it be that is causing negativity towards the USD?

Only one word is needed to answer that question, it comes from a universe of alternative facts and it summarises the source of pretty well all of the various negative expectations for the US economy and the USD – Trump



Returning to the divergence that I referred to earlier that began at the start of July 2014 (and last shown in a couple of charts back on UM in February this year - see bottom of page 305 of “Baht What up with Dat?????” thread - for those interested this is a link to that page: baht-what-up-with-dat-t1041-4560.html

That divergence is showing no significant sign of closing, in fact, by my preferred measure of the USD (DTWEXM) the divergence has actually increased to some degree; these are updates to those charts:

• This chart shows the marked divergence between the nominal USD/THB exchange rate and the international value of the US Dollar, for additional context it now also shows when the Presidential election occurred and also the four Fed interest rate increases which have actually seen the USD/THB rate fall 2.08 Baht (5.8%) since the first one (apologies for its appearance but adding context inevitably adds a degree of complexity).
  

  

• This rather simpler chart shows the net percentage changes by which US Dollar Indexes – DTWEXM (Major), DTWEXB (Broad) & DTWEXO (Other Important Trading Partners) compared to the change in the USD/THB rate since the start of July 2014.
  

  

[semperfiguy]

Thanks Jimbo! As always your posts are very meticulous and informative. So, I guess the bottom line for all of us is the burning question....where is the USD headed against the Thai Baht? Just one year ago I brought the majority of my cash assets to Thailand and placed them in a USD Foreign Currency Deposit Fixed Savings Account rather than convert the USD to Baht at the time. All the soothsayers were predicting a 40 to 1 exchange rate by year's end, so at the time I thought I had made a pretty safe move to protect the value of my USD's. As luck would have it I have already lost nearly 10% of its value if I were to make that exchange today. I'm surely under no urgency to sell right now, but I certainly want to avoid another repeat of a 2011 transaction when I bought my home here when the exchange rate was only 28.85 to 1. The irony is that I lost money on the exchange rate, but was fortunate enough to buy the home just before the housing market took off, and now my home is valued at 60% more than I paid for it, so I have more than made up for my loss on the exchange rate. Don't we all wish we had a crystal ball???????? After all is said and done, about the only thing we can do is rely on the old Pan Theory....in the end everything will just pan out!

[tyznd]

The USD along with the entire US economy is going to tank - either later this year or next. I've been researching this for a number of years and the data and info I have collected would fill a library.

I got rid of all my USD some years ago but should have gotten out earlier. There still be some upward movement in the near term but I would bet with a high degree of certainty the long term trend is going to be downward for the dollar. How low it will go is anyone's guess but I wouldn't be surprised if it hit the 20 baht mark again.

[parrot]

The USD along with the entire US economy is going to tank - either later this year or next. I've been researching this for a number of years and the data and info I have collected would fill a library.

I got rid of all my USD some years ago but should have gotten out earlier. There still be some upward movement in the near term but I would bet with a high degree of certainty the long term trend is going to be downward for the dollar. How low it will go is anyone's guess but I wouldn't be surprised if it hit the 20 baht mark again.

There's a related thread at dollar-lets-give-the-baht-a-rest-t6774.html that goes back to 2007. And most every year during that thread, someone predicts that without a doubt the dollar is about to tank. And of course, sooner or later someone will be right.
I'd be less willing to bet my money on the Baht than I would on the dollar, but even then.....coups, riots, airport takeovers, and a host of other serious problems have had little impact on the exchange rate. Actually, in most of those cases, when you'd assume the Baht would tank, it doesn't.

[dingdong]

As long as Donald Trump continues to PO (Upset ) many nations in the world (Qatar, Iran, North Korea, China, Canada, Mexico Venezuela, Syria, etc ) the American Dollar will remain weak