Et voila ! The “beggar thy neighbor” virus strikes again !
The BRICs are buying dollars at the fastest pace since before credit markets froze in September, protecting exports even as leaders of the biggest emerging markets consider alternatives to the U.S. currency.
Brazil, Russia, India and China increased foreign reserves by more than $60 billion in May to limit currency gains as the first global recession since World War II restricted exports, data compiled by central banks and strategists show. [...]
The Dollar Index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, lost 6.4 percent last month, the biggest decline since March 1985. [...]
“What we are seeing is a public expression of discontent over the dollar, yet nobody knows what needs to be done specifically,” said Elina Ribakova, the chief economist in Moscow for Citigroup Inc. [...]
Federal Reserve holdings of Treasuries on behalf of central banks and institutions rose by $68.8 billion, or 3.3 percent, in May, the third most on record, Bloomberg data show. About 51 percent of the $6.36 trillion in marketable Treasuries are held outside America, up from 35 percent in 2000. China is the biggest foreign owner of Treasuries, increasing its holdings to $768 billion as of March from $60 billion in 2000. (Bloomberg)
And what about Thailand ? Well, it’s too much to ask the Bank Of Thailand to show any sense of creativity or originality… The BOT is happy to follow like a good dog (waving its tail)…
Look at the chart…
[Source Bank Of Thailand]
End of may, we almost reached the all-times record (april 2008). Foreign currency + forward positions (if you want to know what are forward positions, read my previous article) increased to a total of 127,76 billions USD !
The brain of those people are wired in a certain way… They are unable to change their behavior when confronted to totally new circumstances. They all wish a weaker THB in order to “save thai exports” (read my article).
Always the same short sighted view and analysis.
Look at the same chart, with the exchange rates USD-THB.
But if you think about it, the situation is even worse : those countries are buying USD… because they are buying… US debts !
The object they are buying, and the medium they are using to buy, are both doomed. It’s a lose-lose game.
Do they have choice ? Probably not.
But the gap between reality and statements is widening. They are talking about “discontent” with the US Dollar, but they continue to stockpile… USD. Welcome to the Rabbit Hole.
But Thailand should be careful… It can’t play this game for too long. Thailand is not China, nor Japan… The speculators are going to smell the blood… It’s like if the BOT was crying : “come to daddy”.
Meanwhile… thai politicians are looking -with envy- at the BOT’s reserves likes the wolf of Tex Avery… A mountain of money… More they could ever dream of… And, on a more practical level, the coffers are empty and the government is totally broke… so…
More on that later. Stay tuned.