Foreign Currency of Thailand

ForeignCurrency of Thailand

Theforeign currency deposit refers to the financial assets in acountry’s central bank held in distinct reserve currencies such asU.S. Dollar, the Japanese Yen, and the Euro alongside others. Theprice of one currency expressed regarding another is known as theforeign exchange rate, for instance, the exchange rate between ThaiBaht (THB) and US dollar. The supply and demand of individual’scurrencies determine the exchange rates over a specified time. Thepaper will give an assessment of the foreign currency of Thailand,analysis of the same currency against the U.S dollar over the time of5-year as well as a discussion of exchange –traded fund (EFT) forthe foreign currency of the Thailand.

TheThailand currency is known as the Thai Baht. In Thailand, all theforeign exchange transactions are executed through the approvedbanks. Foreign currency accesses financial system of Thailand withoutany restrictions. Nonetheless, an individual who brings or take outthe amount of foreign currencies exceeding $20,000 has to report tothe customs officers. Failure to do so may lead in the criminaloffense. An individual obtaining the foreign currencies are mandatedto give them to an approved bank or else deposit the same amount in aforeign denominations account within a period of 7 days. Thailand hastaken on the managed exchange rate system since 1997 (Waiquamdee,2008).The central bank of Thailand has developed the foreign exchangeframework that focuses on sustaining its stability. The bank does notaim at the exchange are of any particular magnitude but control andsupervise the exchange rate movements in tandem with the economicbasics. Traveler’s cheques are typically allowed only at specifiedforeign exchange places such as banks. There are plenty of AutomatedTeller Machines at various locations in Thailand that take in cardsissued in main international banking frameworks such as plus.

Anexchange Trade fund (EFT) of foreign currency of Thailand

Anexchange Trade fund (EFT) refers to an investment fund comprising ofassets like bonds, stocks as well as commodities that are traded onthe nation’s stock exchange. A variety of investors prefersexchange trade fund because of their low outlay and tax efficiency.Thailand announced its first equity in September 2007. Any investorsin Thailand can purchase and sell units in the EFT all through thetrading periods via the use of ordinary brokerage accounts. Theprocess entails opening up the brokerage account, monitoring thetrading price in real time basis, sending order regarding selling orpurchasing through the brokers and finally obtaining cash or the ETFunits. Dealers charge normal transactions charges related to the saleor buying of the EFT. The exchange commission’s in the secondarymarket is usually 0.1% less than the 0.25% fees indicted fortransferring stocks and the index monies. To determine the market ofEFT, one has to consider two distinct kinds of prices for the EFTnamely the trading price which is a bid and offer charges displayedon a trading screen. These fees are determined by the supply anddemand in the market. The second price is the net asset value (NAV)for the EFT which refers to the total amount of its assets less theliabilities. The NAV of the EFT is computed once per day by the EFTfund controller (Richard, 2011). Moreover, the investment firm alsocalculates and announces the analytical NAV to the investors on aminute –to-minute scenario. Analytical NAV estimates the intra-daynet commodity ideals of the EFT. Hence investors can utilize them asthe indications for the underlying worth of the investment which inour case is the SET50.

Theyare two forms associated with investing in an EFT they include thecapital gains whereby the investor can exchange an EFT such as acommon stock and then purchase it when it is at low cost and sell itat an elevated price to obtain profit. The second form of priceincludes the dividends, in this case, the fund director collects thedividends from the stocks that consist the Set50 and then dispersethem to EFT holders after deducting the transaction charges. The risklinked with the EFTs includes the economic, political and alongsideother types of risks that influence the set50.

Thailandforeign currency against the U.S dollar over the 5-year period ending2010

Analysisof appreciation trend of Thai Baht during 2005 to 2010 expounds moreon the foreign currency of Thailand against the U.S dollar. Theappreciation pattern of Thai baht initiated from roughly 2005 andintensified in the first quarter of 2005 ranging from 38.50 to 46.10baht to the US dollar. The Baht’s value strengthens in 2006 due tothe capital inflows. According to the Thailand statisticalinformation, over the period of three months that is from October toDecember 2006 over 100 billion equivalent of 3 million US dollar hadentered into the Thailand in the form of short-term and speculate onthe baht appreciation (Bank of Thailand, 2011).To prevent the extremetrade rate variations the central bank of Thailand placed somelimitations on the short-range speculative influxes and concurrentlyloosens up rules put on capital inflows. The actions focused onenhancing the delivery of Baht to equalise the rising demand for theBaht. On December 2010, the baht /US dollar exchange rate stabilizedat 35.0 baht to the US dollar(US Dollar (USD) to Thai Baht (THB)exchange rate history,2016).The central bank’s director explainedthat the bank was not definite if the exchange rate would end withoutintercession.

Insummary, the movement of Baht rise in value and volatility of thebaht/American dollar trade rates were outstanding in 2005-June 2009.The baht had toughened from 46.00 baht to the US dollar in July 2011to 32.1 baht to the American dollar in March 2009

References

Bankof Thailand.(2011). Bankof Thailand`s announcementNo.70/2001:additionalreports on

nonresidentbaht accounts, Bankof Thailand’snews,May15, assessed April 6, 2008,http://www.bot.or.th/bothomepage/General/PressReleasesAndSpeeches/PressReleases

USDollar (USD) to Thai Baht (THB) exchange rate history.(2016). Exchangerates.org.uk.

Retrieved29 October 2016, fromhttp://www.exchangerates.org.uk/USD-THB-exchange-rate-history.html

RichardA. (2011), The EFTBook: All you Need to know About Exchange-Traded Funds,John

Wiley&amp sons.

Waiquamdee,A.(2008). Managedfloatingat the BOT.SpeechattheSecuritiesAnalysts

Associationof Thailand, Stock Exchange of Thailand Building,April 29, Bangkok, Thailand, assessed May 2, 2008, [available at

http://www.bot.or.th/bothomepage/General/PressReleasesAndSpeeches/Speeches/Thai-version/Governor&ampDeputyGovernor/2008/29Apr2008_ManagedFloating.pdf].