Thanong said he would discuss what a suitable rate should be with BOT governor MR Pridiyathorn Devakula. He said yesterday that he believed the central bank would take care of the matter until the currency found its natural level.

"I'll talk to the governor next week," he said. The baht yesterday opened at 38.00/38.07 to the dollar and ended at 38.00/38.03. It peaked at 37.95 during yesterday's trade.

"The baht kept strengthening all day before easing back at the close, probably because of intervention," said one currency dealer. "We expect it to rise further this week, around 37.90 to 38.20.

But Pridiyathorn said the central bank did not intervene the market, after the baht significantly appreciated amid high capital inflows.

The baht appreciated quickly in the past two months. Although its rise was in tandem with regional currencies against the greenback, a strong exchange rate has stoked concerns among exporters whose dollar-earnings are affected when they are converted into baht.

The Thai Chamber of Commerce's Economic and Business Forecast Centre predicted that if the baht strengthened above 37.50, exporters would be affected the most.

It said there was a high possibility the baht could top 37.50 this month or next. But if the appreciation turns out to be short-lived, export growth would not be affected, and the 13-15-per-cent target would remain intact.

To balance the growth of exports and imports, the centre said an appropriate level would be Bt38 to Bt39. The centre said central bank intervention might be required to attain that.

Thanong said the baht's recent gains should be temporary, because its rise came on the back of huge capital inflows into the local stock market over the last three months.

Amounts as high as Bt100 billion were brought in to settle the Shin Corp Plc share transaction and for use as direct investment in a local steel company.

"The massive inflows indicated there was strong confidence among foreigners in the Thai economy. If the political unrest settles down, the economy should expand faster than at the current rate," he said.

BOT deputy governor Bandid Nijathaworn said yesterday capital inflows into the country were continuing, putting additional pressure on the baht to appreciate quite rapidly.

"Today, the baht rose quickly. The central bank has been closely monitoring the exchange rate. It is concerned that it may move too far too fast," he said.

He declined to disclose whether the central bank had intervened yesterday.

Pridiyathorn said the central bank did not take any action in the currency market yesterday, because the currency was moving in line with regional currencies.

"We didn't do anything. If we had, it would not have been that strong. If the baht moves the same as regional currencies, we do nothing. But if it's the only currency rising, we'll take action," said the governor.

He said the bank had tried to keep the baht at a proper level for facilitating a stabile environment for exporters.

Bandid said the amount of local exports in the past two months was also higher than expected.

He did not say whether exports for the whole year would surpass earlier forecasts of 10-12 per cent.

He admitted that oil prices were currently higher than when the BOT made its projection.

Anoma Srisukkasem,

Somruedi Banchongduang

The Nation