The Bank of Thailand (BOT) was selling off US dollars yesterday (June 19th) due to the depreciation of Thai baht. Meanwhile, the Thai currency yesterday was traded at 33.44 baht per US dollar, the lowest value in the last five months.
The BOT Deputy Governor, Mrs. Atchana Waiquamdee, insisted that the central bank will not utilize the baht as an instrument to alleviate the inflation problem. She says the BOT will intervene once the currency fluctuates. (PRD)
How ironic. Until a few months ago (march read here)… it was exactly the contrary. The BOT was buying USD like crazy to curb the THB versus the US currency. A weak THB was necessary to boost exports.
And this policy costed a huge amount of money (read here).
Today, the story is different : the black swan of inflation, the energy bill that widens the trade deficit, the global financial correction/crisis (foreigners are selling their assets in THB like stocks. Before they were buying), etc.
hmm interesting stuff in your blog. looks incredibly gloomy…
sense of dejavu after 1997???
Well… I don’t really like the word “gloomy”. I try to stick to what I prefer to call “common sense”.
Overall, if you peruse my blog since one year…. well I was good. I mean I was really good !
I was right on many political issues (look at the current situation today, with PAD rallyes, the country is totally blocked and polarized).
As for the economy, right too : with inflation, with the currency issue etc.
I had one thing wrong : exports. Last year, when the THB was increasing, I really thought that exports would suffer a lot. It didn’t happen.
Anyway. As for the “1997 deja vu” feeling. Here too I don’t really agree. The cause of crisis, from my point of view, are differents and much more powerful.
1997 was if I may say a very classic economic crisis, like in a text book : overinvestment (from condo to industry), overvalued currency, a strong peg on the currency,… the mixing was perfect.
Today it’s more complicated, and it’s really different (it’s not explained in the books, this is why people are so lost).
Looks like BOT might be making a profit now, if they bought USD at 31, and are now selling at 33
Why not. But the real problem is the bonds.
http://thaicrisis.wordpress.com/2007/12/21/currency-management-bot-lost-228-billions-thb-since-2006-and-has-a-debt-of-2-trillions
The BOT issued mountains of bonds to “sterilize” the flows of dollars in Thailand.
That’s a long term problem : because they need to pay interests.
Anyway : we should have in july the financial report of the BOT for 2007.
http://www.bot.or.th/English/AboutBOT/FinancialReports/Annual/Pages/Year.aspx
It’s going to be tasty, because it will cover a full year of “currency management”.
Too much problem from in Thailand from the Thais.
First PAD’s selfish request, followed by a bad government and now is the inflation rate.
I heard next year government bond will be inflation + (rate). Sound kinda unreal. Did you also heard of something like this?
Nope. And it sounds far fetched indeed. Let’s say with an annual inflation rate of 6, plus rate at 3.75 (we could forecast 2×0.25 hikes from the BOT just for the show)… 9.75 ? Surreal indeed. Today.
I mean next year… seems so far away. The black swan of inflation could become even “blacker”.
However, we can’t deny that there is a pressure upward.
And already, some investors are loosing patience (read this article :”Bond investors are proving less patient with India, Thailand and the Philippines, markets where yields will continue to rise on worries about fiscal…”
http://uk.reuters.com/article/managerViews/idUKORM62743420080616)
The world looks to be skating on thin ice… I really want to invest in Thailand more but I’m seeing inflation and the cut in subsidies and what they are doing to developers and it’s not looking good at all.