BOT relaxes foreign currency regulations

This title (not from me) looks very sexy.

But it’s seriously overstated.

The Bank of Thailand has extended the allowable period of time for each individual to successively hold US currency from 120 days maximum to 360 days in order to cool down the baht appreciation and the daily fluctuations in the money and stock markets caused by hectic inflows and outflows of foreign currencies. ” (TNA and Nation)

Basically, thai exporters for instance can from now on keep for 1 year the USD they receive, before to exchange them against THB.

Great. What the BOT wants to avoid is people selling USD and buying THB (leading to an appreciation of the THB versus the USD). Fair enough.

But the article fails to say that the BOT took exactly the same decision… last july ! At that time, the maximum holding time was… 15 days.

So let’s try to understand this latest move…

-why the BOT waited 6 months before to increase the maximum from 120 to 360 days ?

-since july, what happened ? Did the USD appreciate against THB ? Not really ! Therefore, why this new regulation could have more effect now than before ?

One word : psychology. And well.. another word : common sense.

Why on earth would you keep your USD longer ? When you know that the FED hasn’t finished its interest rates cuts cycle ? That the USD continues to loose ground versus all the currencies in the world ? And is likely to continue to do so on short and medium term… ?

Actually, it’s exactly the opposite : if you receive a large amount of USD today, it’s better to exchange it as soon as possible. Because next week, it’s likely that the exchange rate would be worse and that you would loose money.

So again, and again, the BOT seems on another planet, with no real leadership, with only one operational department : the department to make noise about very idiotic ideas.

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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