The thai gamble devaluing currency to revive economy – the new york times 100 usd in euro


The central bank of Thailand’s decision yesterday to devalue the currency, which caused it to tumble as much as 20 percent against the dollar, represents a gamble by Thai policy makers to shore up the country’s faltering economy.

By instituting what it called a ”managed float,” in which the baht will be allowed to fluctuate more widely against other currencies — in effect, a devaluation — the bank took pressure off the Government’s foreign-exchange reserves, which had been drained of billions of dollars as officials sought to prop up the currency against assaults by speculators aud to usd forecast 2015. A weaker baht also lowers the cost in other currencies of Thai exports and stocks, making them attractive.

And the devaluation may eventually lead to an easing of monetary policy; by keeping interest rates high, the central bank tried to support the beleaguered currency.

On the other hand, while interest rates might eventually fall — helping the economy regain the kind of growth that had turned Thailand into one of Asia’s ”tigers” — the central bank’s immediate move on rates was quite different binary quotes. Accompanying the currency devaluation, the bank raised a key lending rate by two percentage points to guard against a surge in inflation — now a sharper threat binary code generator. By requiring more baht to buy a dollar, a weaker currency could raise the cost of imports.

”It was a very risky move, courageous and risky,” said a Western economist, who insisted that he not be further identified. ”The consequences are totally unknown binary puzzles. It’s an extremely fluid situation.”

The move came after repeated Government assurances that the baht would not be devalued dow futures trading hours. Three days ago, Prime Minister Chavalit Yongchaiyudh repeated the assurances in a televised speech, saying that if the currency were devalued, ”we will all become poor.”

What, then, pushed the central bank to take this gamble? After all, with a fast-growing economy in a fast-growing region, Thailand has been a free-market success story.

Bangkok, where most of the growth has been concentrated, has been awash in more money than it sometimes seems to know what to do with stock market futures charts. Above the proliferating wine bars and auto showrooms, an overpowering new skyline has emerged — hundreds of imposing modern buildings filled with enough unsold space to satisfy residential and commercial needs for the next five years, according to some estimates decimal word problems grade 6. And the building boom continues.

But over the last year, the economy has slowed, with growth falling to 6.7 percent last year from 8.5 percent in 1995, and people have become worried us dollar to uk pound conversion. Exports are down sharply and the nation is facing a budget deficit for the first time in a decade euro to usd rate. Until a rebound yesterday, the stock market had dipped to eight-year lows, the trade deficit had risen and bad property loans had brought crisis to financial institutions.

Aggravating the crisis, foreign speculators, expecting the baht to fall sharply, began selling the currency, forcing the central bank to try to prop it up.

A hedge fund operated by George Soros, the billionaire investor, was known to be among the bigger speculators involved in selling the currency short, hoping to profit from an anticipated decline in its value.

In response to the currency attacks, the devaluation was an unexpectedly decisive step by a Government that has been criticized for vacillation in the face of growing economic problems. Its success or failure could determine the future of the shaky seven-month coalition Government led by Mr usd price today. Chavalit.

Still, the decision, coming after the new Thai Finance Minister had promised investors there would be no sharp changes in economic policy, could be seen as a measure of the unreliability of the country’s economic managers, the Western economist said. ”Their credibility is not strong,” he added. ”They’ve broken their word several times.”

One skeptic was Barton M. Biggs, global strategist at Morgan Stanley, who contended that the Thai central bank had shown little ability in managing a precarious situation. ”Investing in Thailand has become a lot riskier than it was three months ago,” he said. Yet stocks are more than 30 percent cheaper than they were at the start of the year, he said, ”so you have to weigh the trade-off.”

After the central bank said yesterday that it would let the currency float, the exchange value dropped as much as 20 percent, to 29.50 baht to the dollar offshore. In New York yesterday, it settled at 28.7 to the dollar.

The main Thai stock index rose 7.9 percent on the news, its biggest rally in more than five years, and the index of the 50 largest stocks was up 9.27 percent.