Chart, currencies : THB is tied to the US dollar

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).

7 Responses to “Chart, currencies : THB is tied to the US dollar”

  1. 1 Thai TV 29 October 2008 at 7:09 am

    “We will have a freaking institutional crisis when the King will pass away.”


  2. 2 Rockderk the Great 30 October 2008 at 1:20 am

    From the point of view of the average hapless farang toiling away and being paid in baht, the peg to the USD is good news. Incredibly, it seems that someone at the MOF actually learned from the ’97 debacle and decided to copy Malaysia’s idea to peg to USD which isolated them from the madness of ’97, while THB went to 56 to the USD (if I remember correctly)

  3. 3 Bob 30 October 2008 at 1:35 am the Thai baht is a non-event, but will it continue this way now that the yen carry trade in unwinding and the Aussie dollar and Euro is falling?
    Wouldn’t a few month with $3-5 billion dollar trade deficit upset this non-even balance and hurt the Thai baht?
    Any ideas or comments on the future of the Thai baht vs. dollar?

  4. 4 James 30 October 2008 at 3:06 am

    Crisis will hit hard and war will probably erupt with a neighboring country when the King passes. The baht should be at 40 but the bankers want the Asian currencies to rise so the multinational corporations that control the world will have more customers than they currently have from America. If the market proves the bankers wrong as they have with oil moving to $250 as Goldman Sachs, Thailand will get crushed. So basically we have manipulation of currencies by global bankers on part of the mega multinationals and if it doesn’t work out, the developing economies of Asia are going to be set back decades.

  5. 5 ThaiCrisis 30 October 2008 at 4:31 pm

    By the way, you want to know what is real inflation ?

    Check this out.

  6. 6 nvidia2008 4 December 2008 at 2:20 am

    Thank you for your analysis. Malaysia since about September 2008 is also operating a “secret peg” to the USD. Just look at the MYR currency chart. Suddenly around Sep 2008 it follows the USD so closely when compared to other currency. Also, the MYR is suddenly “leviatated”. Thailand and Malaysia is avoiding all the “problems” of the currency crisis of the 90’s. However, does it reflect the fundamentals of the economy being fixed?

    Good luck in Thailand. You all need to sort the overall mess out. Malaysia luckily is not in such turmoil.

  1. 1 The nutty Baht, Clucking and some Thai wisdom… at The FARANG Speaks 2 Much Trackback on 2 November 2008 at 2:43 am

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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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