Marked rise in international value of THB in November 2022

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JimboPSM
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Marked rise in international value of THB in November 2022

Post by JimboPSM » December 1, 2022, 6:56 pm

The increase in the Nominal Effective Exchange Rate (NEER) of the THB in November 2022 of 2.63% was the largest monthly increase since January 2013 (2.64%).

While a relatively large increase was expected (well, at least by those with a reasonable grasp of international economics, foreign exchange markets, interest rate differentials and an interest in the Thailand economy) this was larger than I expected.

The main reason for the improvement in the international value of THB in November, although it may appear to be counterintuitive, was the improvement in US economic data in recent months (rather than economic data in Thailand).

The interest rate increase of 0.25% announced by the BoT at noon yesterday (30th November) had very little, if any, impact of the November NEER as the increase had been expected since the end of September.

The chart below is of the Nominal Effective Exchange Rate of the THB since January 1994.

It is notable how the seemingly inexorable rise of the THB since mid 2005 was not only halted but reversed by the two black swan events of Covid and Ukraine.


Notes:

My preferred measure for the international value of THB is the Real Effective Exchange Rate (REER).

Unfortunately the November data for REER lags that of NEER by a month.

However, as the differences between the two are relatively small the NEER data does provide a good indication of what can be expected from the REER data.

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Re: Marked rise in international value of THB in November 2022

Post by Giggle » December 1, 2022, 9:23 pm

Sorry Jimbo, you've lost all credibility with your hysterical obsession on personality over fiscal policy.

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Ashli Babbitt -- SAY HER NAME!

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Khun Paul
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Re: Marked rise in international value of THB in November 2022

Post by Khun Paul » December 2, 2022, 7:05 am

Giggle wrote:
December 1, 2022, 9:23 pm
Sorry Jimbo, you've lost all credibility with your hysterical obsession on personality over fiscal policy.

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If dear boy you ever showed the same level of intelligence as Jimbo , I might agree with you , sadly your post is just sour grapes. Have a good day

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Re: Marked rise in international value of THB in November 2022

Post by parrot » December 2, 2022, 11:20 am

Thanks, Jimbo.
Makes me think back to ?Aug 97?, my friend and I needed weedwhackers......the fixed rate of 25.3 to the $ suddenly changed to 27/28. We were in heaven.....we both plucked down 8000 Baht for what we thought were bargains of the century. Within days, the exchange rate plummeted to 35 then 40 then 45 then 50. A few months ago I made a sizeable transfer US-THB at 37. Within days the rate was 38 and I felt like I got the short end of the stick. I don't know of anyone who predicted such a quick fall back to the 34 range.
There was a time when people thinking about moving to Thailand didn't need to take into account the exchange rate on their retirement incomes. That pretty much changed in 1997......good for some, at times, bad at other times.

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Re: Marked rise in international value of THB in November 2022

Post by Stantheman » December 2, 2022, 7:18 pm

Does anybody remember the exchange rate early 1970's. I think the cash rate, not fx rates that banks do, was around 40 to 50 baht to dollar

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Re: Marked rise in international value of THB in November 2022

Post by parrot » December 2, 2022, 7:53 pm

Pegged at 20.8

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Re: Marked rise in international value of THB in November 2022

Post by JimboPSM » December 3, 2022, 9:46 am

parrot wrote:
December 2, 2022, 7:53 pm
Pegged at 20.8
While you are correct to say that the THB was pegged, what it was pegged to actually varied as described below.

This is a brief extract from the Bank of Thailand about the post WW2 period up to 1997 when the “Pegged Exchange Rate” regime operated.
The pegged exchange rate regime was first adopted after the Second World War from November 1948 until June 1997. The value of the baht was initially pegged to gold, then to a major currency [USD], and finally to a basket of currencies. During this period, the Exchange Equalization Fund (EEF) announced and defended the value of the baht against the US dollar daily. Given the environment at that time, the pegged exchange rate was deemed the most suitable to support sustainable economic growth.
This a chart of the monthly average monthly buy/sell rate for the USD against the THB of data that I have from January 1981 (I don't have verifiable data prior to January 1981) to June 1997 during the “Pegged Exchange Rate Regime” where it can be seen that, although “pegged”, the rate varied. The period when the THB was directly pegged to the USD (August 1981 to October 1984) is clearly obvious.
  • Thailand Pegged Exchange Rate 1981 to 1997.jpg

These are some isolated rates that I found have which provide a bit of additional exchange rate history from those years; however it should be noted that they were extracts from a research document which did not include a source for the rates or what form of rates they may be (e.g. buy, sell, mid etc), my assumption would be that they are mid rates.
  • Thailand Isolated Pegged Exchange Rates.jpg
    Thailand Isolated Pegged Exchange Rates.jpg (31.52 KiB) Viewed 2514 times
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Re: Marked rise in international value of THB in November 2022

Post by JimboPSM » January 13, 2023, 10:20 pm

JimboPSM wrote:
December 1, 2022, 6:56 pm
The increase in the Nominal Effective Exchange Rate (NEER) of the THB in November 2022 of 2.63% was the largest monthly increase since January 2013 (2.64%).
The increase of 2.63% in the November 2022 NEER has been followed by a further 2.16% in the December 2022 NEER.

The improvement of actual and forecast US economic data in recent months continued to be the driving force behind what is being (incorrectly) described in some media as the “strengthening” of the THB.

While the impact on the USD/THB exchange rate may appear at first sight to be counter-intuitive it is actually the result of basic supply and demand economics and exchange rate mathematics.

  • Nominal Effective Exchange Rate from January 1994 to December 2022
    Thailand 2022 Dec NEER.jpg
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Disgusted that the UK is “governed” by a squalid bunch of economically illiterate, self-serving, sleazy and corrupt neo-fascists.

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