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Home » Reader question » Why is the exchange rate of the Thai Baht falling so quickly?
Why is the exchange rate of the Thai Baht falling so quickly?
Dear readers,
Which financial expert can explain to me why the Thai Bath is falling so quickly. (Almost 8% in one year). Does this only depend on the state of the Thai economy (for example, a decline in tourism from, say, China), the political direction, or are there other factors that play a role here?
Of course it is difficult to look into the future, but are there conceivable factors that could lead to a recovery?
I can't find much about this on the internet.
Regards,
Henk
Dear Henk,
The Thai baht is stronger than ever against other currencies.
Your link with tourism decline – where did you learn that from? So I can't put it down at all.
The Euro is falling in value compared to the Dollar and Baht for various reasons. But the US Dollar and Australian Dollar have also fallen against the Baht, which only seems to be strengthening.
The Thai economy is doing just fine. Tourism is rising instead of falling.
It is the dollar, the euro, the other currencies that are just doing badly.
So the bath increases in value, not decreases as you say.
Indeed I would not say that tourism is decreasing, here in Pattaya it is full house. Russians and Chinese thousands…. perhaps the run-up to the election will change this. Let's hope
Where all those thousands of Russians and Chinese are located in Pattaya is a big question mark to me.
Because of the Chinese New Year celebration on February 5, there are indeed more Chinese people to be seen.
Usually around Chinese entrepreneurs with their offers.
Ha ha you should go to Jomtien mate… restaurants, travel agencies even the fruit carts that drive around is in Russian. On the beach you are surrounded by Russians… try… try Jomtien beach. Stampe but also stampe full of Russians. I'm not exaggerating, I'm in Russia on vacation
Pattaya is bigger than Jomtien.
Indeed, near Grand Jomtien Hotel you can see many Russians on vacation.
Continue towards Na Jomtien and the flush becomes much thinner, possibly to the
Dong Tan Beach.
The news and news also enlarge everything on 1 event and then it seems more impressive.
Ho ho I think you see everything through rose-colored glasses ,, I've been coming to Jomthien and Pataya for years, it's never been so quiet here ,,,, and tourism is being artificially upgraded here ... so don't exaggerate ...
The Thai economy is doing well?
Where do you get that from?
In the 12 months I've been coming to Thailand where I live now (Hua Hin) I've only seen the economy go down for the last 4 years. Unless you mean some melomaniac projects for which there is no money to pay for them. The rate at which I see businesses closing is terrifying. And when be asks the Thai why that is the case, you always get the same answer: very bad economy.
Just look at the many apartments that are empty all over thailand and especially in pattaya and also buildings that are half built due to lack of money
If I may believe the Thai around me, in the Netherlands, it could very well have to do with the upcoming elections. I think I'll just stick with the Euros for a while.
Sincerely,
Chris
Dear Inquisitor, Thailand's economy is doing well and tourism is on the rise.
Unfortunately I hear and see other sounds.
Jan Beute.
Thai Baht is not declining, only getting stronger.
It's because of the 'pleuro' and Brexit.
Isn't it amazing considering that the ECB has stopped buying government bonds and the Thai government is borrowing billions to finance infrastructure that the Baht is only getting stronger against the Euro, yet disaster of all Europeans who live here and go on holiday and their have income in euros.
YES
My idea is that the Thai administrators are currently artificially raising the bath because of the upcoming elections so that they can tell the population that they are doing very well economically. I think it will fall again after the election.
Tourism Rising ? I suppose that's meant to be funny. I live in Chiang Mai a few months a year and in recent years I have only seen a decrease in the number of tourists, many restaurants are complaining and are struggling financially. I hear the same stories about Hua Hin , Pattaya and others. The numbers published by the government are slightly exaggerated to put it politely. the Russians have disappeared en masse, largely in Pattaya, due to the fall of the ruble. The Chinese, who usually come up with a Package deal, generate little or no financial added value. The pensionadas and expats are having a hard time due to the high rate of the BHT, part of which has already moved to Cambodia and Laos. The Thai economy is doing well? Tourism made up 30% of GDP I think is only declining, I don't know any economist who can give a sensible explanation for the increase in Bht
Tourism is only 5% of GDP.
Also in Phuket, the season is the worst in years if you listen to the people who own hotels, restaurants and bars here.
You forget that almost 50% of the Thai economy is informal and is not reflected in the statistics. These are precisely the people who often depend on tourism.
Dear Henk, I think you may have meant it correctly, but you actually wrote it the other way around.
Compared to the Euro and the Dollar, the Thai Baht has increased in value.
To what extent tourism and the rest of the economy has also increased, as far as such reports can be believed, I have my doubts.
Certainly with a persistently strong Baht, it is actually obvious that Thai export products will also become more expensive for foreign countries, and that tourism will not be able to benefit from this in the long run.
Apart from the normal price increases, a holiday has become at least 10% more expensive just because of the high exchange rate of the Baht.
Well Hank,
It is exactly the bottom, the Thai Bhat has become much stronger against the Dollar and Euro.
Unsurprisingly, the dollar has “suffered” under Trump and the Euro under the invasion from the Middle East and Africa and Brexit.
And Thailand, it continues to run, although various companies have complained that exports are becoming more difficult.
Has nothing to do with 'invasion', you let yourself be misled by 'devils' and gut feelings. Namely, add 1 million people to a population of 500 million, that is 0,2%, so if we assume with simple reasoning that this also has an influence of 0,2% on the euro….
It has everything to do with the printing of Euros by the ECB and ever lower growth (which has become clearer in recent months) of the European economy. The low interest rates in Europe also play a role.
The British pound has fallen in value the most, but Great Britain is also the champion of money printing, having started earlier than the USA and Europe.
It's a very simple story! The economy of Thailand is therefore doing better than the EU (read the Netherlands), In fact we should be ashamed of our eyes … .. . Time for Rutte and his scoundrels to leave!
Thailand had a trade surplus of USD 2018 billion at the end of 1 and that money is also converted into baht and it is a supply and demand issue.
The Netherlands had a surplus of 7 billion, so the workers there are doing well, but billions of euros were printed during the crisis years and this is an annoying side effect that it cannot be converted into value.
In other words, a kind of punishment for people who make an individual choice to leave the country of birth.
You don't have to be a financial expert to understand that the Bath is not falling, but rising. The fact that you get less Bath for a Euro means that the Bath becomes stronger compared to the Euro. The same is happening against the dollar. Is there unrest in the European and American financial markets due to Brexit and the Lock Down? Possible. I'm not an expert either.
The government in Bangkok knows very well that the economy in Thailand is bad.
Only the EEC and Bangkok are doing well and the rest are not.
If the government were to start with a benefit for the unemployed, at least 10 million people would register.
Dear Henk.
The Thai Baht is and remains strong, it is also kept artificially strong.
The Euro is going down like a brick, you are confused with that.
It will be high time they devalued the Thai Baht, the Japanese Yen and the Chinese Yuan.
This will certainly promote tourism in Thailand vis-à-vis neighboring countries such as Myanmar, Laos, Cambodia and Vietnam and will significantly improve the competitive position in the international rice market.
Which will help the overall Thai economy move forward, because it has gone a lot less well in recent years.
Short version: exchange rate movements of the THB/USD in the past year mainly resulted from changing expectations about US monetary policy.
Below is the long answer.
1. A currency is not a unit in itself, but is always expressed in relative terms. An increase (appreciation) or decrease (depreciation) of the baht (THB) compared to what?
2. Exchange rates are mainly influenced by money and capital flows in financial transactions. The movement of goods and services (including, for Thailand, exports of computer parts, machinery, food and inflow of tourists) usually has a lesser impact, and is also often more stable than financial liquidity, which can sometimes dry up spontaneously (e.g. during a financial crisis, revolutions , etc.).
3. In the short term, exchange rates are mainly determined by current and expected interest rate differences between countries. An exchange rate is thus determined indirectly on the basis of the expected change in economic growth (lower expected growth can lead to interest rate cuts by the central bank), political unrest in a country, changes in trade flows, etc.: everything that the (future) interest rate differentials between countries. It is often a complex combination of factors that explain the exchange rate differences.
4. In the longer term, exchange rates are determined by changes in the balance of payments (current account and capital account) of countries and available liquidity in the countries concerned.
In the case of the THB, I think you should mainly look at the THB/USD ratio. The USD market is still by far the most used currency in financial transactions and the Bank of Thailand also adjusts its monetary policy to that ratio. This exchange rate was THB 2018 (per USD) at the beginning of Feb 31,43 and THB 2019 at the beginning of Feb 31,30. Hardly changed, but there were movements in the past year.
In the first half of 2018, many currencies in Southeast Asia depreciated against the USD, mainly because the US central bank gradually raised interest rates (with expectations of further interest rate hikes). The interest rate differential narrowed, making it relatively less attractive to invest in these emerging markets compared to the US bond market. In the second half of 2018, the price remained stable at THB 32-33. From mid-December there is again an appreciation (rise) of the THB against the USD. In my opinion, this is mainly explained by circumstances in the US: expectation of a slight economic slowdown, uncertainty about trade relations with China, indications of no interest rate hikes by the central bank for the time being and of course the political developments in the US (shutdown, tightened relations between Democrats and Republicans). Growth expectations for Thailand have recently been lowered somewhat, but have not led to a depreciation (fall) of the THB against the USD.
Since the dollar markets are still so dominant, the THB/EUR exchange rate is mainly explained by the THB/USD exchange rate and the EUR/USD exchange rate. The EUR/USD rate was 2018 at the beginning of Feb 1.25 and is now 1.15 (-8%). I think this is mainly due to the interest rate hikes in the US, while interest rates in the euro area are still close to 0%. Economic growth in the euro area is expected to weaken and expectations of an interest rate hike by the ECB have therefore been pushed further into the future.
The stable THB/USD exchange rate (+0,4%) over the past year and the 8% depreciation of the EUR/USD exchange rate logically leads to a depreciation (i.e. a decrease) of the EUR compared to the THB (-8,3% ), or vice versa: an increase of the THB against the EUR by 8,3%.
I don't think the Thai economy is that strong at all. And certainly not as strong as the exchange rate of the baht suggests. From conversations with Thai bank management I understand that the exchange rate of the baht is artificially kept high by the authority of the ruler. It needs a lot of Euros and dollars for its major projects with foreign companies. In this way he gets his needed Euros and dollars cheaply. The ordinary Thai does not notice a growing tourism, it is worse than ever. Tourism from Asian countries is growing, but ordinary Thai people don't notice it. These are all organized group tours. The earnings of this will disappear into the pockets of the large organizations.
Louis Chevallerau, I completely agree with you. In my opinion, the price of the THB is valued much too high. If the price is indeed kept artificially high (and I think it is) then a sharp price correction is waiting. I remember years ago that for 1 euro you got about 50 THB. And I suspect that the THB will move in that direction again in a few years. Because as it stands now, Thailand is pricing itself out of the market. This is already noticeable in the decline in tourism. Everything gets more expensive every year. My wife and her family also complain bitterly about what they have to pay for fuel for the car, for groceries at the market, in the shops, supermarkets, etc.
CeesW.
50 baht for 1 euro is not very realistic for the long term. When it was introduced, it was roughly 1 euro for 40 baht, which has risen for a while to slightly above 50, but between 2002 and now we mainly see it fluctuating between just under 40 and close to 45 if all goes well. Around 40 THB is a lot more realistic.
https://www.xe.com/currencycharts/?from=EUR&to=THB&view=10Y
(I found a site at the end of January that looks back to the introduction of the Euro in 2002, but I can no longer find it)
The THB is not falling, my dear, but rising.
The economic growth figures in 2018 of around 4% significantly influence the price. This is partly due to more exports, an increase in the number of overnight stays in hotels and government investments in infrastructure. For many Thai people, these good figures will not affect their income and for foreigners who receive their income in euros, things will not get any better in the near future. This is not because things are going badly in the Euro area, but Thailand's growth figures are significantly higher.
It is a fact that the Euro is not doing well due to the measures taken by the ECB and the Brexit talks.
But to blame only Rutte for this, who is in principle only a very small cog of many others who deal with this, I personally think it has been pulled by the hair.
I would certainly also wait until after the elections in Thailand, because I have a strong suspicion that the Junta and Prayuth make everything much nicer than it really is.
The artificial uplift of the Thai Baht, in my opinion, and the highly questionable reports of a rising economy and tourism may suddenly revert to a real reality after this election.
Many foreign investors shy away from unrest, just like a military Junta that has seized power itself, and are also not interested in an increasingly stronger Thai Baht for their exports and imports.
The only ones who like to take pride in these numbers are the current government and their leader Prayuth, who also wants to shine again in the upcoming elections.
Also currency trading
It's a matter of supply and demand.
If there is a lot of demand for the THB and little supply, the price will rise and we will therefore receive less THB for a euro. (a lot of demand: e.g. more foreign holidaymakers, the economy is doing well, many investments, etc., but there can also be manipulation indeed by very large parties)
If there is little demand, it will fall and we will get more THB again.
If you look at the price over the last 5 years, you will see that the THB is rising and also falling. etc etc.
In my opinion, the baht will continue to fluctuate between 35 and 37 in the coming months.
Of course I hope that in connection with exports and the necessary inflation for Thailand, the baht will weaken and we will get 40 for our euro again.
The central bank of Thailand has recently raised interest rates, thus increasing confidence in the Thai bath and strengthening it.
Thailand has a cash reserve of $ 207 billion, their national debt is less than 50% of GDP (gross domestic product). All this gives a lot of confidence for large investors to use their money here by giving loans or putting it on interest . If the large investors buy government bonds from the Netherlands, for example, for 3 years, it will cost them about 0,3%, so negative interest, so you get less back than you lent out.
Thai exports are suffering, but already in 2017 those export companies were slightly compensated by the Thai government. It makes no difference to the domestically earned money. So much more foreign money is now coming in through the purchase of the bath. The government uses that money to pay off loans.
When the guilder was still there, you exchanged 8 baht for 1 guilder, which is converted 17,5 baht to approximately 1 euro. The euro came into existence in 2002, so now we are talking about 18 to 19 years ago with the exchange rate on the guilder.
The fact that the bath fell in value so sharply was due to the banking crisis and the tsunami of 2004.
As soon as the ECB decides to raise interest rates, things will get better for the euro, because if interest rates are raised, this means a stronger market and more confidence from large investors.
So all in all there are quite a few influences.
Here's a reliable source https://www.businesstimes.com.sg/banking-finance/thai-baht-outperforms-in-emerging-asia-amid-favourable-domestic-foreign-factors.
“More investment from abroad – so more Thai baht is bought, stronger trade surplus, not only from tourism but also from exports of cars, among other things, low inflation and interest rates are higher than those of the euro and an imminent increase by the central bank ( not yet a fact) makes the Thai baht even more attractive.
In addition, the euro has become less attractive (4% last year to the dollar anyway) due to Brexit, lower growth in Germany, and a budget deficit of more than 3% in Italy.
Hello, don't just think of yourself but also of those friendly Thais, our hosts.
We foreigners are losing out a bit, but we're already rich, aren't we?
With that strong bath, the Thais can finally go on holiday to Europe and the United States and spend their money there…..
Tino Kuis, I understand your perspective, but I still think that you are doing something too disparaging about the decline for foreigners (Europeans). We haven't lost "some", but for the Europeans living here the currency loss is almost dramatic! Notabene: 10/12 years ago we still received 1 baht for 47 Euro, now that same Euro remains below 36 baht (this weekend at the bank 35,25 baht). That is a loss of purchasing power of about 25%, especially for all those who spend a large part of or their entire income here! And then I don't even want to talk about the more expensive stuff in the supermarket!
Well, Henkwag, but what do you want to compare to?
My emigration plan in 2002 was based on course 37 because that was what I got then. In 16 years I have seen that rate climb to 53 and drop to 34 and now it is between 35 and 36 so my purchasing power has remained almost the same, regardless of price increases. So it's not as dramatic as you describe it for everyone.
People who counted themselves rich and did not think about the risks of another currency are now getting the lid hard on the nose, but they could have calculated this and built a pot. Currency movements can turn out as plus or minus.
That's right, Henkwag. Those foreigners have lost quite a bit in their income and I was too disparaging about that. But almost all foreigners have an income of 45.000 baht a month and most of them 65.000 baht a month or more. Then they belong to the 1% in Thailand. The average salary of a Thai is 15.000 baht per month.
I must admit that I generally have more sympathy for the poor and uncomplaining Thai than for the rich and complaining foreigners.
Hello all,
In any case, many thanks to everyone (and especially Yuri) for the various answers.
Anyway, my question has sparked a discussion.
Sorry for my fallacy that the Bath has gone down.
The reason for my question stems from a planned investment in building a house.
In any case, it is clear to wait for now.
Just hope the price doesn't get stronger for a long time.
In any case, the above statements show that the exchange rate movements of Baht in particular, but linked to it also the dollar and euro, is a complicated matter without uniform explanations.
It is now certainly clear to me that this cannot be directly traced back to the economic and tourist movements.
Idd I also hear in the "Thai" corridors in the Netherlands that it may also have to do with the upcoming elections.
As far as the decline in tourism is concerned, you can also read above and it became very clear to me in various publications and after my visit to Hua Hin at the end of last year.
Perhaps this does not apply to BKK or other areas, but I can not speak about this.
Keep an eye on it. :))
You're welcome
As for outlook (your other question), I must underline that we are currently in quite uncertain times:
– Brexit. In the event of an unfavorable outcome (“no deal” / “hard” Brexit), this could lead to a fall in the EUR against the USD, and probably also the THB. “If cool heads prevail” I expect that the effect will not be too bad.
– USA. There is a good chance that there will be another shutdown this month that could put pressure on the USD. This could lead to an appreciation of the THB against the USD and probably also the EUR.
– Elections Thailand and especially the possibility of social unrest afterwards. This could lead to a depreciation of the THB against the USD and EUR. Not good for Thailand, of course, but a nice bonus for people with income in those currencies and expenses in THB.
In terms of monetary policy, I do not expect interest rate hikes in the next 6 months in the US and certainly not in the Eurozone. In December, the Bank of Thailand raised interest rates by 0,25 percentage point to 1,75% and I think it will hold back until the elections.
It is therefore a good idea to await the above developments. If a certain event leads to a significant fall in the THB against the EUR, you can even benefit from it. A good strategy is to have a certain rate in mind in advance at which you would like to make a transaction in Thailand / transfer money to Thailand. Then you avoid disappointments afterwards.
https://www.bloomberg.com/news/articles/2019-01-31/no-stopping-baht-as-em-asia-s-best-performance-extends-into-2019
Henk…for the twentieth time…The Bath is getting more and more muscles….the dollar somewhat…the Euro is becoming a wet washcloth…
I think it is not the bath that goes down, but our euro!!!
Just back from Thailand
Everything becomes too expensive for Europeans
Barely 35,60 for 1 euro
So everything is 20 percent more expensive
If it continues to evaluate like this, it's over for me
How do you get 20%? 10% seems more accurate to me – although that is still quite a lot.
The Thai economy, and more specifically the whole of SE Asia, is improving. The economy is running like a winch and the political situation is stable. In short, everything investors want is available. No rules about undeclared work taxes and even less about environmental legislation.
I never knew otherwise. The better your economy, the stronger your currency. I don't know of any strong economy with a shit coin.
dear blogger, after reading all these posts, I think you are a bit on the road
lost.since 1980 I have been doing currency as they call it..the Thai bath has NOT fallen but
up against the euro. If we look at the US dollar, the bath euro would now be at least 39
there is no doubt that this is very harmful to exports.. there are many times in it
meetings with the Thai exporters, but the central bank says that this is not necessary.
the flow of tourists from china continues, so the economy is going to be smooth sailing
another horde of Indians who makes us what. when inquiring at department stores and trade is none
talk of growth.when will the mind come back. these both don't spend a bat.in both
countries we have been working for 25 years. this week only us euro higher thai bath lower. this cannot continue
they meet themselves. economy in thailand just ask credit rating agency FITCH and you
gets a staggering answer. have spoken to a major real estate agent, general buying freeze.
the financial world is taking a rest for a while. we'll see how this turns out but there
comes change.
regards theo.
Mid 80s 13 lecture evenings (a 4 hours) followed at the UvA about international exchange rates and everything that – in the past – influenced this. At the end, one of the (evening) students thanked the (evening) professor and also asked him what the exchange rate of the US$ will be against the European currency TOMORROW / next week. Answer: for that exchange rate you don't have to be at the Faculty of Economics, but at that of Psychology. If people think that… it often happens.
In mind to keep the German Bundesbank, which had 3 BILLION DM for currency intervention on the US$ below DM 3.-. Consequence.. whiz.. and gone were those DM 3 billion. Prof: About US$ 1000 BILLION per day passes through the financial markets. Did you really think that the Bundesbank could do something with interventions (or Rutte… Schater). No, a Dragi, who says: we will do EVERYTHING to support the €uro… the whole €uro bloc… with A LOT of exchange confidence (that's why the Greeks weren't allowed out) THAT makes sense!
And they haven't been printing money for 60 years, rather the reverse: only 9% is still "paper money", the rest are lines and a computer printout.
So if there are TIG billions of €uros in trade in uncertainty due to a Brexit, European elections coming up with even more deceivers, who want to do the same to their country (PVV, FvD, AfD, Le Pen, Liga Nord + 5 Stars, Catalunya, etc. ), the Italian economy that does not grow by 3 % but shrinks by 0,4 %, so the budget deficit there threatens to fly even further with a government debt of € 2,3 TRILLION, the yellow vests in France for tens of billions of euros in damage have caused and there is still no solution, the German economy is faltering, then your and my pension funds, savings banks, insurers want to play it safe given the return requirements and hundreds to thousands of billions fly around the world in minutes. Thailand - and some other SE Asian countries now seem to be a reasonably interesting airport (for the time being).
By the way: do you remember the starting rate US$ = € 1,197 (with a wave up and down to “clean up” the black money) … compared to now € 1,15 … everything is reasonably stable … for years.
very short very simple
The THb is too strong..the Euro too weak...everyone has a different stake in the market right now..They will never let the Euro get as strong as it was before..unless the dollar goes down completely.
Let's hope that the THB weakens somewhat.. We have seen this before .. is not sustainable in the long term.
In my humble opinion, the fact that the bath is very strong is not only due to the weak euro and dollar. No government can enter elections with a devalued currency with any chance of a favorable outcome. That will be punished in the voting booth. I therefore suspect that the government supports the bath very firmly. If the elections are all much clearer and we can see that the bath is really that strong.
What a complaint again.. When I first came to Thailand, 1993, I didn't even get 13 THB for my guilder (so x 2,20371), so less than 29 THB for the Euro. And now 35.. so why all the complaining?
Because times are changing, I also got 1990 baht for 14 guilder in 1, but when I bought my house here in Thailand (2007) I was lucky enough to get 52 baht for 1 euro and now it's only 35 baht for 1 euro , so it makes sense that we are complaining a bit at the moment.