Chapter 228 Attacking the Thai Baht (2)

It has to be said that the trading volume of the Thai baht contract on the London International Financial Futures and Options Exchange (LIFFE) and the Chicago Mercantile Exchange International Monetary Market (IMM) is not large, and even the two together with the underlying amount It is also inferior to the share of the Asian market (Singapore International Financial Exchange SIMEX). This is certainly the reason why European and American investors have little interest in emerging markets, but it is also because SIMEX has a huge influence in the Asian currency market.

But the situation is different now. Although the number of transactions in the European and American markets still has not caught up with SIMEX, if in London and Chicago, the Thai baht is quoted at a low price, and if there is a different price in the Singapore market, then arbitrageurs have traces to follow. Arbitrage in the mutual market will eventually pull the price to the same level.

   More importantly, it is mainly international capital that sells the Thai baht in the market, that is, these people control the trend of the Thai baht to a certain extent. Therefore, even though the trading volume of the Thai baht in the Singapore market far exceeds that of the other two places, the general view in the market is that the real-time quotations in London and Chicago can reflect the real trend of the Thai baht.

   Mastered the spot foreign exchange market, thereby strengthening the right to speak in the futures market.

  Now the market wants to know at what price those international capitals who have borrowed a lot of Thai baht will defeat the BOT, and this price will appear in the futures markets in Europe and America for the first time.

  However, this day was destined to disappoint them, and the two sides died down after only a little contact. Due to the seemingly tough statement issued by the Thai government and the intervention of the BOT, the short-sellers were unable to further suppress the currency value of the Thai baht, and could only close their positions after obtaining some profits.

  Seeing that the trading volume tended to be stable again, Zhong Shi went home. The average price of the Thai baht forward position he established is at the level of 25.50 baht to 1 US dollar, and he is still in a profitable state. Moreover, he only has more than 100 million US dollars in the contract on the exchange, and the rest is the OTC forward counterparty for foreign exchange hedging. The time is basically about one year, and there is no position problem at this stage.

  …

  Two days later, on May 14, during the daytime trading hours on Monday, international capital officially began to violently attack the Thai baht market from the futures and spot foreign exchange markets.

  Although the Prime Minister of Thailand came out to speak, this kind of speech has little effect on international capital. In a free market economy system, the role of the government has been weakened to a negligible level. While the Thai government still plays an important role in the economic system, their influence is limited to local institutions because Thailand is open to foreign capital.

  There is a rumor in the market, a rumor that makes investors panic, that the Thai government is considering expanding the floating range of the Thai baht from the current 4% to 10%.

  For this trick, several protagonist countries have tried it in several currency crises. Britain tried, and the pound was forced to leave the European exchange rate system. France once tried, although it did not force the franc to depreciate, but at that time the entire European exchange rate system expanded the range of fluctuations between currencies, which was equivalent to the existence of the entire exchange rate system in name only. During the Mexican financial crisis, Mexico did this. As a result, Mexico's foreign exchange reserves were quickly depleted, and it was forced to announce a depreciation in just two days.

   That is to say, so far, countries that have used this trick to resist foreign exchange shocks have all failed without exception.

   Now at this sensitive time point, such rumors appearing in the market will undoubtedly deal a heavy blow to the already precarious Thai baht. As soon as SIMEX opened, the value of the Thai baht plummeted. In a flash, it broke through the limit stipulated by the BOT and fell to the level of 26.04 Thai baht to 1 US dollar.

  Once the boundary was broken, the panic in the market was exacerbated. For a while, there was a surge of selling in the market, and the value of the Thai baht fell unit by unit. The bullish side was surprised to find that the BOT did not intervene as they expected.

  What is the Bank of Thailand doing at this time? They are trying to cope with the pressure from the spot foreign exchange market. When the opening hours of banks in Bangkok arrived, there were countless calls from all over the world to sell Thai baht at the lower limit stipulated by the BOT.

  The foreign exchange market at this time is irrational at all, because the news is so convincing that others cannot believe it. If you don't sell at the lowest level of 26 baht to 1 US dollar at this time, you won't be able to sell at this price after the floating range expands.

  No one even thought about the possibility that this news was a rumor, because in recent months, negative news about the Thai baht has been flying all over the sky, and hedge fund bigwigs have visited Bangkok one after another, putting a lot of pressure on investors holding Thai baht. Coupled with the ambiguous statement of the Thai government, this panic has been exacerbated.

  As the counterparty, the Thai banking system is naturally unwilling to sell US dollars at this price. Although they have not received the news that the Thai baht will expand the floating range, for safety reasons, they began to ask for help from the BOT.

   "Is it finally here?" Zhong Shi said to himself in the office, looking at the changing numbers on the screen.

  When the news of rumors appeared in the market, Zhong Shi realized that the international hot money had finally started to move. This was a signal of their aggressive attack on the Thai baht. Sure enough, SIMEX's Thai baht contract was under tremendous selling pressure as soon as it opened. The bulls had almost no power to fight back, and could only blindly let the Thai baht fall outside the range stipulated by the Bank of Thailand.

   "Should we also join the army of short sellers?" Andrew said without losing the opportunity. Although there are nearly 10,000 positions in SIMEX, it is clear that the people of Tianyu Fund are not satisfied.

  Zhong Shi nodded, indicating that they could follow the short-sellers, but then added "enough is enough". At this time, due to the repeated appearance of the Thai government to support the Thai baht, coupled with the news from the United States, the managers of the entire Tianyu Fund focused on the Thai baht.

   This is the keen sense of the top predators, and ordinary investors have no idea what is going on. In the United States, Paul Tudor Jones' fund and Robert Julian's Tiger Fund also followed Quantum Fund to build huge positions.

There was a lot of selling in the spot foreign exchange market, and at the same time, there was a continuous decline in the exchange rate level in the futures market. It is no longer possible to say who is affecting whom. Almost everyone realizes that this is the second time that international capital has traded on the Thai baht after the selling in February. attack.

  The Bank of Thailand has ignored the abnormalities in the futures market, and can only concentrate on coping with the huge selling pressure from the spot foreign exchange market. In the trading room of the Bank of Thailand, the phone call has never been interrupted. It has always been a quotation from various banks to sell Thai baht. The Bank of Thailand must control the Thai baht within the specified range.

  At the same time, calls for help were made from the headquarters of the Bank of Thailand to Singapore, Hong Kong, the Philippines and other places. According to the agreements negotiated in advance, banks in these regions began to gradually buy Thai baht in the spot exchange market.

  At the same time, the Bank of Thailand called major commercial banks and the media, declaring that there was no plan to expand the fluctuation range of the Thai baht at all, and at the same time reiterated the statement of stabilizing the Thai baht and not devaluing it. But at this time, the price in the futures market has broken through the range stipulated by the Bank of Thailand, making the selling price in the spot foreign exchange market also break through the range of 26 baht.

  When a quotation lower than 26 baht for 1 US dollar appeared on the spot exchange market, the BOT immediately followed up and took him at a price of 26 baht. In fact, they don’t need to take action, as long as there is such an offer, commercial banks will automatically eat them, because seeing the Bank of Thailand’s statement, their own trading department does not need to worry about the depreciation of the Thai baht, and only needs to sell the Thai baht to Thailand in the end Banks do.

At noon, under the strong intervention of all parties, the pressure on the spot exchange market was relieved a lot, and the BOT executives had the mind to pay attention to the intervention in the futures market. However, when their executives heard the instant quotation, they almost fainted past. When they were trying to maintain the minimum limit of 26 baht to 1 dollar in the spot exchange market, the futures market has been beaten by short sellers, and the lowest level even fell to 26.94 baht to 1 dollar, which is 3.61% lower than the current spot exchange market .

  BOT officials who felt the urgency quickly ordered traders to increase the transaction price of the Thai baht contract. Even if they stabilized the currency value in the spot exchange market, they had to withstand the pressure from the futures market. Because if the two are not synchronized, futures investors will choose to deliver at maturity, and then sell at the spot exchange price to earn the difference, which will still create depreciation pressure on the Thai baht.

How could the traders not know this truth, but they could only smile bitterly at each other after a morning of hard work, and then worked hard to raise the exchange rate price of the Thai baht in the SIMEX market, almost unit by unit, and finally in the When Singapore closed, they finally managed to raise the exchange rate of the Thai baht to 26.41 to 1 US dollar. No matter how high it is, there is nothing you can do. This is not over yet, and then they have to maintain the exchange rate of the Thai baht in the London market and the Chicago market.

  In the spot foreign exchange market, on this day alone, the Bank of Thailand sold as much as 5 billion U.S. dollars in U.S. dollars. Almost every trader received dozens of calls to sell baht, all from various commercial banks. Fortunately, the Bank of Thailand has spared no effort to maintain the currency value of the Thai baht, so that the real-time quotes among banks did not fall below their specified range, otherwise it would start to collapse like the currency futures market.

  In the futures market, judging from the underlying amount on this day, there are more than one billion short sellers, and this is only in the SIMEX market. Traders know that in the following London and Chicago markets, there will be a large number of short sellers.

  Although the exchange rate has been temporarily maintained in the spot foreign exchange market, international capital is bound to attack again as soon as the market opens tomorrow. Over and over again, no matter how much foreign exchange reserves the BOT has, it will be quickly consumed. Therefore, the counterattack of BOT will come soon.

  (end of this chapter)