At the moment, the published exchange rate is 34.90 to the US Dollar. Only a few days ago it was around 35.3. I've said it before and I'll say it again, I simply cannot grasp how all of this works. From what I am reading, the US Dollar ought to be gaining strength. With all the turmoil in Thailand, I would have expected the baht to weaken. I wouldn't have expected it to strengthen.

 

What accounts for this? I DON'T GET IT.

I imagine that the US dollar is going to shrink more and more, even against the baht, as they are "just printing money" right now in US.

That's exactly it- all the debt & printing of money drags currencies like the Dollar & Pound down.

That's exactly it- all the debt & printing of money drags currencies like the Dollar & Pound down.

That explains the weakness of the Dollar and the Pound, but I'm still confused as to what explains the strength of the Baht.

That explains the weakness of the Dollar and the Pound, but I'm still confused as to what explains the strength of the Baht.

 

The variables that go into a particular exchange rate are too many, too mysterious, to be easily understood. If it were simpler then it could be predicted and we'd make money on currency speculation.

 

"Printing money" can certainly weaken a currency but the effect is long delayed. The single biggest factor with the quickest effect may be the balance of trade.

 

I don't see anything that indicates a strong baht this week but in the two months since the USD/THB peaked at over 36, the US exports have fallen further than Thai exports have fallen, thus Thailand has a healthier balance of trade at the moment.

 

Secondly, for the past year the USD has been strengthened by a flight to quality, a perception that the USD would hold up better than yen, Euro, pound sterling, etc. As some of the fear in this global economic crisis eases, the USD loses some of that magnetism.

 

Interest rates matter, too, and Thailand is more likely than the US to continue lowering rates; if that happens then the USD will creep back a bit on the THB, but my guess (just a guess!) is that we'll be hovering around 35 for a good while.

 

Today's K-bank telex rate is 35.07.

Arguably, the Thai baht IS NOT strong.

 

On a Purchasing Power Parity basis, convert $1 to Thai baht & it buys about twice as much as it would in the US (Economist data).

 

I'm not quite sure why everyone expects the US & UK to rack up horrific debts & still maintain an exchange rate so favourable that our workforce earns about 10x what Thais do.