Monday, March 26, 2007

Asian Times: Clouds on Thailand's Horizon


By Jephraim P Gundzik

Mounting political and social instability greatly weakened domestic demand in Thailand during 2006, and a series of policy miscues ensures that stocks, bonds and the Thai currency, the baht, are likely to fall as flight of domestic and foreign capital accelerates in the months ahead.


What is disturbing is the Bank of Thailand's intervention in the baht. Every time BoT has screwed around with the baht, it has come back to haunt them. Why would the BoT play with the baht when it is obvious that dollar has weakened considerably against all currencies for the few years. Also, the strong baht obviously hasn't affected exports since they grew by almost 20% last year. Why fix something that isn't broken? A strong baht is not necessarily a bad thing. It makes some imports cheaper. Also, it reduces the costs of any US dollar dominated loans.

The offshore baht/dollar trading doesn't look good. The arbitrageurs are waiting to pounce.

If there is an attack on the currency, BoT has nobody to blame but itself, again.

The author of this article is a risk analyst and not a journalist. He is predicting gloom. Hopefully, he is wrong.

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