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Sunday, April 17, 2011

The Thai Baht and fluctuating transfer Rates

For anything visiting Phuket in Thailand, an inescapable point of concern is how much things will cost. Thailand has all the time been a relatively cheap place to go for a holiday. As a destination, Phuket is favored by everybody from Brits to Israelis. But the global economic urgency coupled with the effects of negative media coverage on Thailand has meant that less people are visiting the country. Yet perhaps bigger problem is today's replacement rate.

When I first arrived in Thailand, about four years ago, the pound sterling was changing at one to 75 baht. That was a decent replacement rate and it meant that my money went far, be it in Bangkok or Phuket. Now, I find myself in Phuket looking at an replacement rate that defies believe. The pound sterling is now trading at one to 52 baht. That's a decline of almost one third in just a few years.

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Prices in Thailand have not changed dramatically in that time. Expats living in the country indubitably wouldn't have noticed too much of a difference, but for people visiting from the United Kingdom, having one third less to spend than usual is a big change.

It isn't, however, that the baht has come to be especially strong. What is happening is that the pound is incredibly weak. It's so weak that at the occasion it's trading about one for one with the euro, which makes trips to Europe unappealing for any British people. The Brits are staying home. Money is tight sufficient as it is without the replacement rates working against people.

The Americans are in a similar situation. The dollar has typically been trading at about one to 35 baht in the past few years. Right now, it's down to one to 22 baht. Again, that's a decline of about one third. Ultimately, people will travel to Thailand regardless of political turmoil and internal squabbling. But these people are not going to travel if they don't have the money to do so.

With it being so close to 50 baht to the pound, changing money from sterling to baht is almost financial suicide. Conversely, it's not a bad time for British people to be paid in baht. As an example, I recently wired a large sum of baht to the Uk at an replacement rate of 52 baht to the pound. That's about as low as it is going to get and it's difficult to trust the baht in the long run, whereas the pound is a traditionally strong currency.

For all of us in Phuket and the rest of Thailand, we can only hope that 2009 brings more favorable replacement rates against the baht. The pound and the dollar have taken some indubitably big knocks this year and it couldn't have come at a worse time. The tourism commerce in Phuket needs all the help it can get at the moment, but some things are out of the control of the island and its people.

The Thai Baht and fluctuating transfer Rates

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