nomad4ever

It looks like the high rise of the Thai Baht is over for now. The Baht, with gains of more than 16% this year, was Asia’s best performing currency in 2006 – thus making traveling to Thailand slightly more expensive than usual for foreigners.

But what is that? Over the last 2 days it had the biggest 2-day-decline since May 2004, as reported this morning by Bloomberg.

First signals were shown as early as 2 weeks ago, when the Bank of Thailand announced, that they wanted to tackle speculators in the Thai Baht, which had risen significantly over the last couple of months. Thailand has seen slowing exports as a result of a slow-down in the US economical growth. On top of that, the Bank of Thailand wants to “curb the baht’s volatility” and “limit the baht’s strength at a certain level” by selling its own currency. Stronger measures are put in place as well to curb speculation – for instance Banks are now required to lock up 30 percent of new foreign currency deposits for a year to curb speculation, as announced yesterday by Thailands regulators.

Starting today, overseas investors buying baht will only be able to invest 70 percent of what they transfer and only recoup all of their funds if they keep the money in Thailand for more than a year. Those who withdraw in less than 12 months will be penalized 33 percent of that 30 percent portion. “It’s basically as if they’re putting a tax on any trades less than a year,” said Magnus Prim, a senior foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. “It’s going to stop any buying pressure and with the stock market likely to be hit, then we could see the baht falling some more.”

Reminds me a bit of the German Speculation Tax, which has a similar restriction: all stocks you sell within a year after you bought them, you have to declare in your personal tax declaration. All gains during that period are taxed with your personal tax rate. When living outside of your home country (literal translation is ‘foreign tax citizen’) for more than half of one year, you can avoid this tax,which is a good thing for german permanent travelers.

The leaders of the Thai Economy are crying now of course. For them it means more regulation and rules, effectively shooing away investors who prefer an open and free business climate.

Remember Malaysia after the Asian Financial Crisis?

Doctor M. – Mister Mahathir Mohamad – the prime minister of Malaysia at that time, was even going a step further, by locking all foreign investments in the country. I still have some Malayan Banking stocks somewhere in my german Citibank Depot. Effectively the whole thing slowed down the recovery of the Malaysian Economy after the Crisis for another more years, compared let’s say to Singapore or South Korea.

So – but coming back to our favorite topic- traveling. What does that all mean more the average Thailand Traveler?

Basically good news!

The Thai Baht will continue to decrease in value over time; thus making it cheaper again, when traveling in Thailand. You will get more value for your Dollar, Euro or Yen, when drawing from Thai ATM’s or exchanging cash into Thai Baht in your home currency.

Sounds like the first interesting thing to me, what the Thai Military Coupster were doing for us Travelers, hehe! :-)

Technorati : asia, asian crisis, atm, bank of thailand, currency, dollar, dr. m, economy, euro, finance, financial crisis, mahatir, malayan banking, malaysia, money, politics, speculation, speculators, tax, thai baht, thailand, travel, yen

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written by Chris