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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! :-)
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February 14th, 2007 at 5:54 am
Was this so very wrong. The Baht has done nothing but rise every month. Exchange rate for USD is down to 33.4 today. I am losing 1/5 of my money compared to last year. This is not a good time to be a tourist in Thailand.
April 16th, 2007 at 3:29 am
Even worst now. Xe.com is telling us 32.47, and counting … Hotel trading in THB are now becoming more and more expensive, while the ones trading in USD somehow cheaper.
April 23rd, 2007 at 1:29 pm
I don’t view it the same way as the author of “Thai baht decline-better value for tourist”. To buy the same product one year ago may cost 40 baht which was equal to 1 USD. Now the same item which cost 40 baht will cost 1.23 USD today. The economy and pricing hasn’t declined. I still pay the same price for eggs, workers and products. For the last 4 years, I allocated 40,000 baht per month for living in Thailand, which was approx. 1,000 USD. I still with drawl 40,000 baht out per month but my ATM charges me $1,230. So how can this be good for the tourist? It certainly good for Thailand.
April 23rd, 2007 at 2:15 pm
Doug, Michael and Thailand-Traveler – you are 100% right! It just didn’t look that way at the time I wrote the article. Seeing it from today it surely would have been a bad investment decision to short sell baht at that time! :-/
May 4th, 2007 at 1:44 am
Yes I have seen it when I was back in Bangkok for busniess the month of February 2007 the baht was around 35 to the USD now it is down to just over 32, This is not good for people like me.
I will be back June for almost the whole month and I hope it does not go down any further.
Thank you for the great blog and info. Please keep it going.
December 19th, 2010 at 7:41 pm
Please let shinawatta back in , since they ousted him the Bhat has got stronger . I come to Thailand for 6 Months a year , looks like I will have to make it 3 months next year , and 3 months Cambodea .
The appreciation of the Bhat is ludicrous when you concider out side of Bangkok , Pattaya , phuket . Thailand is basically a third world , I live in Issan ( kalasin ) my purchacing power has dropped so much .
I want to buy land , but with the lack of stregnth in the pound It is Impossible
When I came here first 76 Bhat for a pound , now 46 . nearly half the value ..
I have had to brew my own beer , wine . Grow my own ducks and pigs . Its becomming hard work .. I wanted a quiet life .. Its not happening ….
Thai Bhat cannot sustain this growth , the car showrooms are full , new ones are popping up everywhere but there are no trucks cars bikes being sold … unless on finace … what happens when they cant afford the payments cos its going to happen … every boom has a bust ..
Thailand is experiencing a boom first one since the asian stock crash and its going to have a bust , where it wants to improve exports cos they will have dwindled and they will have to devalue the Bhat … :-B :-B hope so I predict 2014 big problems in Thailand , also when the Throne of Thailand passes on , may that day be a long way away . IT WILL CAUSE POLITICAL TENSION
December 20th, 2010 at 9:09 am
gareth, I actually agree with most of what you said, I would also say that Thaksin did a lot to help the rural and poor people, but I can see, why the elites in Bangkok thought otherwise and wanted to have him out. Corruption was striving before and is after Thaksin, so whast’s the difference? Maybe only that during his term a bit more people could benefit from it, than just the usual suspects.
October 5th, 2011 at 9:43 am
And the trend is not a bout to change!
Thailand is a growing country as most of asian country are so it will become less interesting (compared to past) for tourist. But I think it will stay a very attractive place to visit.
Having being in China and now in Thailand I choosed to get a local contract paid in Bath and I can’t regret as every month I feel that the value I am sending to Europe is higher than before.