Interest rate hikes are one of the many ways to resist currency attacks, because for the market, investment rates and Treasury bonds can be regarded as the two least risky investment methods, and are generally considered risk-free investments, and the yields of the two are very close.

Weishenme rate hike can resist currency attacks? This brings us to the risk appetite of the capital. According to the degree of bias towards investment risk, capital can be divided into risk appetite, risk aversion and risk neutrality. Capital invested mainly in the interest rate and treasury bond markets is risk-averse, and it is also the largest group of international investors, who travel freely in various countries and take advantage of the interest rate differentials between different countries to make profits.

Most multinational commercial banks have similar arbitrage methods. For example, if the interest rate in the United States is 5% and the interest rate in Japan is 2%, the yen capital can be converted into dollars for lending, thus earning a 3% interest rate differential. As long as the lending process is risk-free, then the spread is a sure-fire situation.

Naturally, this should also be done with exchange rate risk, because if the yen appreciates by more than 3% against the dollar in the process, the trade will be at a loss. Of course, on the lending side, you can lock in the exchange rate level by making a forward exchange rate contract, which can minimize the risk of the exchange rate.

However, the current situation in Thailand is clearly not able to do this, although they have raised interest rates to 11%, which is fully double the interest rate in the United States, but because the level of forward foreign exchange continues to be low on the Thai baht, even a further increase in interest rates will not attract the inflow of US dollar capital.

And the level of interest rates is mainly aimed at the liquidity of the domestic market. Generally, it is inconvenient for the central bank to change this data frequently, unless it is inflation, otherwise economic development will encounter great trouble. The interest rate hike some time ago has dealt a heavy blow to Thailand's financial industry, and if it is raised again, I am afraid that it will be even worse for the entire Thai financial industry.

When the Malajia babbled a lot of jargon, the prime minister finally understood that the Malagar was euphemistically refusing to raise interest rates. Compared with the political pressure from Southeast Asian countries, Chawalit still pays more attention to the economic situation at home, after all, his votes come from the Thai people.

"In that case, isn't there any other way?" Chavali asked reluctantly.

Joachavali was in front of the Malaka at this time. You will find that the governor of the central bank has a face like earth at this time. I was trembling, and it seemed a little difficult to even stand. Half a day later, Malagar said bitterly, "I'm afraid there's really no other way, Mr. Prime Minister." ”

"Let me think again!" Chavali's voice didn't fluctuate in the slightest. The phone was then hung up.

Chawarit's words did not put too much pressure on the Malagar. Naturally, it will not frighten the Malaka to the point where it is difficult to even stand. It can make him so frightened. It was because while talking to Chavali on the phone, a thought suddenly flashed through his mind.

Foreign exchange swap trading.

When he explained FX hedging to Chawali in detail, he was not aware of FX swaps. But when he thought about it. But suddenly realized the horror of this kind of transaction.

Foreign exchange trading is the exchange of two currencies, but once it comes to cross-border trade, it is necessary to consider the risks of foreign exchange, and foreign exchange swaps are generated for this kind of demand, which is understandable.

But the problem is that shrewd capital is not limited to the physical exchange of two currencies, but also adds to the link of credit. That is, the release of funds in the form of foreign exchange swaps, creating a false boom in the influx of large amounts of money, and then claiming back loans when the bubble bursts, which will deplete a large amount of foreign exchange reserves in the short term, and thus threaten the entire exchange rate system.

In short, it is to obtain a huge amount of money through false trade, foreign exchange swap transactions with foreign financial institutions, and evade the supervision of the Bank of Thailand, which is essentially borrowing funds from foreign financial institutions and then converting them into local currency and putting them on the market.

Because the Thai exchange rate is pegged, the exchange rate of the Thai baht and the US dollar changes very little, so there is not much need for foreign exchange swaps at all. But the main reason why the Thai consortium Weishenme is so keen to trade swaps in the foreign exchange market is the lower financing costs of foreign funds.

The whole process is to borrow US dollar funds from foreign financial institutions through foreign exchange swaps, and then convert them into Thai baht and put them into high-yield industries such as the stock market and real estate. In this way, it can not only inject funds at a lower cost, but also circumvent Thailand's regulations on capital inflows.

If these sectors continue to prosper, swap transactions will grow larger, and if earnings slow or exchange rates fluctuate sharply, foreign financial institutions will demand that loans be repossessed and swaps closed.

Because the essence of the whole transaction is a process of lending, not just hedging. It is therefore necessary for foreign financial institutions to close the transaction early, and they must have provided for similar rights in the contract.

If this is the case, then the rate hike will not only fail to attract foreign capital inflows, but will on the contrary accelerate the flight of foreign capital, contrary to the logic of the operation of financial markets as known by the Malaja. Because once Thailand raises interest rates again, the returns from investment in the stock market and real estate market will be further compressed, which will make foreign financial institutions that lend loans more credit panic, and then withdraw funds more quickly.

"Oh my God, if all this is pre-set up haode bureaus, I'm afraid the currency attack launched by the hedge fund is just the curtain on the whole conspiracy." Malajia couldn't hide the shock in his heart, and couldn't stop gasping, "No wonder there has been so much loss of foreign exchange reserves in this month, it turns out that all this is designed." ”

But this raises the question of what happens if the Thai debtor fails to repay the debt, which involves the proportion of shares and the receipt of foreign exchange in Thailand. If foreign investors participate in Thailand's real estate market through lending, they will inevitably understand the financial situation of the partner. As we all know, Thailand is a country that relies on export-led economic growth, and there is no need to worry about dollar reserves in the case of foreign trade growth, but when export growth slows down, foreign financial institutions will consider stopping issuing or even recovering dollar loans.

Unlike foreign capital that enters the Thai market through the capital account, these funds are completely unregulated, commonly referred to as "hot money", and this kind of capital can do far more harm to a country's economy than the capital that simply attacks the foreign exchange market.

This is the underlying reason why the BOT with $32 billion in foreign exchange reserves was almost depleted in May, in just one month, and did not show it on the capital account.

And now the boom of shorting the Thai baht is obviously a move that international capital has prepared in advance. Their first move is to first stir up the overvalued public opinion of the Thai baht and attract the attention of capital; The second is a large-scale attack in May, which turned the rumors that have been circulating in the market for a long time into reality; The third move is happening now, which is to completely defeat the baht.

Throughout the short-selling process, BOT never saw through the overall conspiracy, but had a headache and did not realize that this was a huge conspiracy that had been arranged for a long time and carefully planned.

This conspiracy is obviously not just aimed at Thailand, but the entire Southeast Asian region, and even East Asia, including Japan. Because once the baht depreciates, the currency of this region will have a chain effect like dominoes, and eventually evolve into a situation of vicious depreciation of each other.

The Malajia is no longer imaginable, because the entire region has not been united into a formal organization, and the two sides can only choose relief based on the proximity of their relationship, rather than uniting as a whole to fight the crisis. Moreover, this is far beyond the scope of what he can think about now.

"This shouldn't be a game that a consortium or hedge fund can design, the shili behind it must be ......" Malajia didn't dare to imagine it anymore, although the object of his suspicion was already coming out.

But what is Weishenme? Malagar's motive immediately came to mind, which made him a little confused by his judgment, these Southeast Asian countries are all allies of the United States, and even have their military bases in some regions, and according to the economic strength of these countries, even if they work hard to develop for another hundred years, they cannot be the opponents of the United States, so the goal of this great conspiracy is obviously not against them.

"Japan? It's also unlikely, Japan has been subdued in the past few years. Malajia frowned and thought about it, and finally denied the possibility of targeting Japan, "Then, the only one who can wrestle with the United States in this region is Huaxia!" ”

However, China's capital account has not been opened, and it is seeking to enter the WTO (Shijie Trade Organization), so it is obviously impossible to compete with the United States at this time. However, the return of Hong Kong heralded the rise of China, and it seems that the center of American diplomacy is about to shift to East Asia. "Malajia has fully figured it out, this attack is not only a loot in Southeast Asia, but also a warning to the rising China.

"What do I want to do so much?" Malajia shook his head and smiled bitterly at himself, "I listened to Mr. Prime Minister just now, it seems that he is ready to give up the exchange rate system." I'm afraid he's looking for a scapegoat right now, right? ”

He was right, and the prime minister, Chawalit, was considering a scapegoat to the outside world. Obviously, this situation of unfavorable domestic economic growth and the difficulty of maintaining the value of the Thai baht is not in line with the promise he made to the people before he ran for the election. Naturally, in this case, both the Minister of Finance and the Governor of the Central Bank will face the fate of being abandoned, and the Thai baht will not depreciate for a while and a half, so naturally the Malajia cannot be thrown, and the Thai Finance Minister An Levi Rawang will become a victim. (To be continued......)