We have some very strong winds on the currencies front since a few days.
The USD explodes against many currencies (but not versus the Yen)… And what about the THB ?
People seem puzzled to see that the Euro, the Australian Dollar, the British Pound are all going down against the THB. Violently.
The thai currency seems “in levitation”… Insulated. Protected from the world’s problems… And protected from its… own internal issues.
A political crisis since 2005 ? No problem. We don’t have a proper government ? Mai pen rai. Protesters occupy the government’s house ? Never mind. We will have a freaking institutional crisis when the King will pass away ? Peanuts. The country’s economy rely on exports, and exports are about to take a big hit ? Not an issue.
I mean if one currency should go by the drain it would be, it should be the THB !
Here is a a new chart. it works with pairs linked to USD and THB. For instance USDEUR and THBEUR.
Then we have a few time periods for comparison : 1 month ago, 2 month ago etc. And the % of change of the exchange rate compared to october 28, the point of reference.
Let’s take an example.
Yesterday, USDAUD was at 1,633 (1 USD = 1,633 AUD). One month before, USDAUD was at 1,204. it means that a that time the USD was 26,3 % lower than yesterday.
The THBAUD was yesterday at 0,047 (1 THB = 0,047 AUD). One month before, it was at 0,035, that’s 25 % lower (we can say if you prefer that the THB increased by 25 % in just one month).
You get it ?
We can see that between the USD and THB against other currencies, we have a rather amazing correlation ! Particularily on the short periods (1 month, 2 months and 3 months)
I think it’s clear : the THB is in a way “tied” to the US Dollar. It’s not really a surprise. The Bank Of Thailand has a long tradition of “exchange rates manipulation”… oops sorry, “exchange rates management”. Yeah, that sounds much better. Click here to see all my articles about this issue.
I know, I know they are not alone. Far from it ! Several countries… are playing the same game.
But… I would like to say that if there are a lot of technical reasons to explain the (current) violent explosion of the USD… those reasons are nowhere in the picture as far as the THB is concerned !
To have a THB moving in parallel to the USD is totally artificial.
Now… how this could be possible ? We know that the forex is so big that any interventions is likely to fail. In 1997 for instance, the pathetic attempts from the BOT to prevent the THB to go down.. failed. And it started the asian crisis.
But 2008 is totally different. I started to explain my theory on this article (look at the comments).
Basically, the task of the BOT is easier today because :
-the THB has been insulated from the hot money and speculators by several factors (capital controls from december 2006 to march 2008, the political crisis since 2005, the fact that it was pointless to take risks with the THB when it was possible to make 100 % winning bets on AUD, NZD, JPY, etc)
-the THB is a non-market as far as volume is concerned. By small interventions, on shore, the BOT is able to manage more or less exchanges rates, or to curb the trends.
-no volume, no opportunities, no leverage, no future, no need : a non market.
-the THB has been ignored. Put on the side.
-therefore, in times of deleveraging, the thai currency suffers less.
(If you wish to check the datas for the chart, exchange rates and the % of change, here they are).