Chart, foreign currency reserves : BOT stockpiles USD… like other BRIC countries

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.

6 Responses to “Chart, foreign currency reserves : BOT stockpiles USD… like other BRIC countries”

  1. 1 chang dek 11 June 2009 at 5:56 am

    Why do they call printing money “Quantative Easing” ….?

    please offer examples why the Tha Tian community should never be broken.

  2. 2 ThaiCrisis 11 June 2009 at 1:57 pm

    “Tha Tian” ? You’re talking about the market in Bangkok ????
    As for “quantitative easing”, i’ts a fancy name for : “let’s print some money, I don’t know exactly what am I doing but it’s okay I can fool people for sometime we will see tomorrow I hope nobody will notice cross fingers” policy.

    Something like that. 😉

  3. 3 antipadshist 11 June 2009 at 6:02 pm

    at the same time :

    26 Russia will buy $10 billion of IMF bonds from the reserves and China may buy as much as $50 billion, IMF Managing Director Dominique Strauss-Kahn said yesterday. Some investors are wary of U.S. assets because the budget deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion, the Congressional Budget Office says.

    China, Russia, and Brazil are among a handful of nations that have expressed interest in purchasing the securities.

    China is “actively” considering buying as much as $50 billion of the IMF bonds, the State Administration of Foreign Exchange said last week.

    IMF securities would give countries a different way to contribute to the fund and are unlike traditional bonds because they pay an interest rate pegged to the IMF’s basket of currencies, known as Special Drawing Rights.

    Ulyukayev said Russia will cut the share of U.S. Treasuries “because a window of opportunity for working with other instruments is opening…

    Still, Brazil, Russia, India, and China increased foreign reserves by more than $60 billion last month to limit currency gains as the first global recession since World War II restricted exports, data compiled by central banks and strategists show. Russia added the most foreign exchange since July.

    President Dmitry Medvedev questioned the U.S. dollar’s future as a global reserve currency last week and said that using a mix of regional currencies would make the world economy more stable. He renewed his call for consideration of a supranational currency to challenge the dollar.

    also in the Bloomberg article TC quoted is mentioned :

    Russia is proposing the BRICs consider creating a new unit of exchange when they meet in Yekaterinburg on June 16. China and Brazil said last month they may look at ways of dropping the dollar for trade between the two countries.

  4. 4 Marvo 11 June 2009 at 10:13 pm

    “they may look at ways of dropping the dollar for trade between the two countries. “

    If that ever happens, what will the effect be on the strength of the dollar? – anyone?

  5. 5 ThaiCrisis 11 June 2009 at 10:51 pm

    I would say : we are not a this stage. Yet. It’s just a first alert, like… a small mosquito bite.

    “China, Brazil yuan trade will take years: Bank of China”

    But China is clearly pushing, like with special trade agreements in Hong Kong, Asean etc.

  6. 6 Fonzi 12 June 2009 at 1:12 am

    The dollar, good or bad, will be the reserve currency. The alternatives really don’t exist. Yuan or the ruble? Toilet paper is worth more on the open market.

    There is a dichotomy with the dollar though: Inflate the dollar as a way of alleviating the debt load or defending the dollar with high interest rates so it doesn’t become worthless, then on top of that you got a weak dollar buying more expensive oil(which is expensive because the dollar is weak), gold shooting up as a hedge against the dollar, but then, what about deflation? Commodity prices have been going down the last year(cheaper oil, stronger dollar, weaker world wide demand because of the recession). But commodity prices shot through the roof last summer because of high oil, as well as the weak dollar. There is a historical correlation between weak dollar and higher commodity prices, regardless of fundamentals. Yeah, I looked it up.

    On top of that, you have the idiot Thai policy makers wanting to weaken the baht(even though a strong baht is a reflection of a weak dollar) to help exporters who are too lazy or stupid to hedge against the currency fluctuations. Besides, a weaker baht is going to make exports more competitive against whom exactly? Are they going to put the onus on the baht when commodity price go up? So, now you have a Thai policy dichotomy: On one hand you have policy makers with a weak baht policy while commodity prices will go up–regardless of fundamentals–because of a weak dollar. By the way boys, a recession still exists, so where is the demand going to come from to buy the more expensive commodities? Hey, let us weaken the baht some more, that will do the trick.

    So now the BoT is sitting on a $100 billion of US treasuries, a big chunk of that to weaken the baht. You have to wonder where the BoT got a $100 billion to buy those treasuries. The Fed doesn’t take IOUs. They only take cash.

    So what now? Buy more treasuries, more Thai taxpayer money to devalue the baht when there is no money left in the coffers and the Thai government is going hat in hand to borrow money abroad at high interest rates?

    Sing happy, happy, joy, joy like Ren and Stimpy.

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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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