One of the questions that keeps popping up is what is keeping the baht so strong with all these problems going on. Maybe that strength's days are numbered:

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Investors begin buying back dollars

 

Published: 15/05/2010

 

More foreign investors have sold off some shares and bought US dollars due to the escalating political violence, Bank of Thailand (BOT) assistant governor Suchada Kirakul said on Saturday morning.

 

Investors begin buying back dollars

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Baht Weakens on Concerns over Renewed Violence: BoT

 

BANGKOK (TNA) -- The baht has continued weakening because investors are concerned over the renewed violent clashes between the military and anti-government United Front for Democracy Against Dictatorship-led protesters, according to the Bank of Thailand (BoT).

 

BoT Assistant Governor Suchada Kirakul said foreign investors had apparently begun to sell the baht and remit the dollar home to a certain extent.

 

Sales of the baht are still proceeding although the volume remains thin, she said.

 

The spate of political violence overnight has shaken investor confidence. Some sold shares and brought money to invest in other instruments, particularly in bonds.

 

She said the baht is now considered volatile by itself and in tandem with the global situation, but its volatility is not heavier than that of other regional currencies.

 

Currency is still moving at an acceptable level. Although foreign investors sold the baht and purchased dollars to remit money home, earners of incomes in foreign currencies are waiting for the perfect timing to sell the dollar, resulting in a balancing of the currency movement.

 

On a comment by a top economist that the baht was very likely to touch 31.5 to the dollar at year-end, Mrs. Suchada said the currency had both strengthened and weakened.

 

Although Thailand has experienced internal and external difficulties, its economy continued growing partly because of the global economic recovery.

 

She revealed the BoT’s Monetary Policy Committee earlier wanted to see the policy interest rate return to the normal level, but its hope was dashed by the current political crisis.

 

(TNA)

1 I believe Thailand runs a balance of trade surplus, unlike some of the western countries like UK, USA & parts of the EU.

 

2 The Thai government looks quite competent, when compared with the Greek government or the old Labour regime in the UK (for example). Fiscal issues have a bigger effect on exchange rates than a few protests. Some European governments, plus the USA have been borrowing way to much for many years.

 

3 Comparing wage levels, is the Thai baht really strong? There is a long term trend to transfer western manufacturing jobs to Asia. The net effect will be converging of incomes.

 

Get used to the idea. Unless of course some kind of course we find a Khmer Rouge style organisation turning Thailand into something like 1970s Cambodia.