The Nation: Export fears as baht hits 9-yr high

[Nicke]

BOT forced to step in to try to cool foreign exchange market as value plunges to Bt36

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[LivinLOS]

Baht appreciation could also be said as USD falling..

Bernanke is trying to jawbone the rate down.. Saying how hes inflation hawkish and watching closely.. If he had any chance to he would have dropped rates already to help housing but hes trapped..

[K2]

Seems incredible that THB rates are the same as US rates - this THB strength is a proxy CNY trade - but looks like getting over done. BoT has plenty of reserves - would expect them to get more aggressive if this pace of THB strength gets more pronounced.

[LivinLOS]

XE gives a rate today of 35.8585 to USD..

Couple in that I figure that baseline inflation is well over 5% and may be near double digits (oil subsidies dropped, food inflation, wages inflation all feeding the cycle)..

Then retirees with USD assets need to have a nice hedge or buffer in thier plans.. Look 5 or 10 years out and livable retirement amounts today start to get worryingly tight.

Even with the current (IMO unjustified) rally.. USD stocks havent been much of a performer when looked at counting USD devaluation..

[Sirgezza]

Originally Posted by LivinLOS

Baht appreciation could also be said as USD falling..

This is the actual truth of the matter I think. The $ is at a 14 year low to the £ with some analysts predicting a break through the $2 to the £ soon.

The £ still gets about 70.5 baht. Maybe this will increase if the baht is to remain tied to the $?

[LivinLOS]

OK so looking this am baht is now 35.91.. the slide continues..

USD went to 1.3367 / EUR this morning..

When you look at US assets from other currencies they dont look like performers.. The housing slowdown / recession / slump / crash (depending on your perspective / opinion) starts to look painful when viewed in non USD terms..

Silver > 14

[K2]

Originally Posted by gez

This is the actual truth of the matter I think. The $ is at a 14 year low to the £ with some analysts predicting a break through the $2 to the £ soon.

The £ still gets about 70.5 baht. Maybe this will increase if the baht is to remain tied to the $?

A break of GBP/USD 2.0000 will not make the BoE happy - we are closing in on area where would start to anticipate postentail co-ordinated G-7 central bank intervention as this USD slide is beginning to accelarate - not desirable comming up into year end.

The THB at the moment is more linked to the CNY at the moment - USD/JPY has decoupled and is doing it own thing. PHP and THB both being muscled - so far CB intervention is doing little to slow the appreaciation. (Offshore O/N THB at 4.3% - onshore 5.22% - no credit market impact - yet).

[LivinLOS]

Dont fight the trends.. Central bankers should have learnt by now (Soros sure gave them a lesson)..

Once sentiment changes, with the world awash with US denominated IOU's the rush to the exits could get real ugly..

Sure makes Fed rate cuts sound hard to achieve.. Right now it looking like rock or hard place are the only options..

[JayBee]

What is happening is merely the resumption of the decline of the dollar, after a 20 month pause that was created by the raising of US interest rates.

When you look at the US balance of trade deficits, and the heavy borrowing by the US treasury to finance Bush's follies, it was really only a matter of time.

But the good part of the story is that developing(aka 3rd world) coountries all over the world benefitted from loose US fiscal policy, which sent capital looking elsewhere for better returns, thus building up commerce in developing countries everywhere, esp. China and India.

Bernanke's challenge is to orchestrate an orderly decline of the dollar, not to stop it, as it is inevitable and natural. Eventually, I think you will see the Euro also go into decline, but not as rapidly as the dollar, since European nations have not been so profligate in their govt. spending as the US.

In the long run, I believe the US will meet the challenge, as it is a nation of vast resources and enterprising people. The decline of the US dollar will stimulate investment in US production to supply domestic demand as imports become more expensive. In the short run, it will aid US software companies in maintaining a competetive advantage in the international market, and enhance profits and valuations on companies which can capitalize on the current trends.

For the US economy as a whole, there may be some periods of painful transition and we may be entering one of those now. Some significant corrections may be in the offing. They will be made, as necessary, and things will proceed from there on the new basis that is established. That is the beauty of the free enterprise capital system. It is self-adjusting. It is when governments get overinvolved in trying to regulate and/or stimulate it, that trouble eventually results. That is, to some degree, what we are seeing now, since loose US policy in the post-9/11 years, designed to keep the populace happy, giving them both guns and butter, has directly put Bernanke in the bind in which he now finds himself. He cannot be all things to all people, i.e., both an inflation fighter and a recession fighter, simultaneously. I believe he will choose the path of trying to stave off recession, at the cost of a strong dollar, as the lesser of two evils.

[K2]

ECB - in even more of a dilema - their charter makes it a near necessity to raise rates (inflation targetting) but with the Euro up here - looks like a nasty hard landing in Eurozone could be comming.

[JayBee]

Originally Posted by K2

ECB - in even more of a dilema - their charter makes it a near necessity to raise rates (inflation targetting) but with the Euro up here - looks like a nasty hard landing in Eurozone could be comming.

Looks that way. Raising rates will boost the Euro, hurt the dollar, and make it tough on European businesses, esp. in the high tech sector.