"I feel the baht is too strong. We've been taking care of it and trying to make it weaker ... But I won't resist the market's direction," governor Pridiyathorn Devakula said.

The central bank stepped into the foreign-exchange market slightly in the morning, he said, adding that it would intervene actively in the afternoon.

After the governor commented on the authority's market-cooling measures at about 2pm, the baht retreated from Bt37.37 to Bt37.46, but turned around again to reach Bt37.42. Dealers believe the central bank would like to keep the baht from passing Bt37.30.

The baht opened at Bt37.35 against the greenback, or 0.07 per cent stronger compared to its last closing, on Friday. It has appreciated 1.35 per cent since the end of last month.

It was also stronger against the euro - by 0.38 per cent from last Friday and 1.59 per cent from the end of July. The baht was up 0.99 per cent against the yen from Friday and 3.09 per cent since the end of last month.

A BankThai dealer said she did not know exactly if the central bank took any market operations but said the verbal intervention helped pull the currency down.

She said the baht had been at Bt37.39 against the greenback and moved down to Bt37.43-Bt37.45 after the governor's speech. It swung back slightly later but hovered around Bt37.44-Bt37.46 before closing in Asian trading at Bt37.46.

The baht posted a six-year high of Bt37.26 in Friday's intra-day trading. Pridiyathorn said huge amounts of offshore capital were flowing into the local equity market due to the cheap Thai stocks.

"There is no capital inflow from GE to buy a stake in Bank of Ayudhya yet. The Thai bourse's attractiveness remains high among foreign investors with the low P/E [price-to-earnings] ratio," he said.

Analysts said the local stock market traded on Friday at a

P/E ratio of 8.4. Over the past three years, the market has traded at an average P/E of 9.7.

The Stock Exchange of Thailand on Friday closed up at 703.28 with daily turnover of Bt11.5 billion. Foreign investors were net buyers to the tune of Bt878.56 million, followed by institutional investors with Bt75.38 million. Thai investors were net sellers of Bt953.95 million.

BankThai's research centre said in its report that the baht would bump around in a narrow band of Bt37.30-Bt37.60 due to the capital inflows, but would not get much stronger because the central bank might buy dollars at a level of Bt37.30 to ease upward pressure on the baht.

The depreciation of the yen after the Bank of Japan maintained its key interest rate unchanged at 0.25 per cent might also help pull the baht back.

Nitaya Pibulratanagit, a central bank assistant governor, said earlier that more than US$100 million (Bt3.75 billion) of short- and long-term capital was injected into the country on Friday. The central bank also intervened in the forex market as the baht was strengthening more than other currencies in the region.

Pridiyathorn said last Wednesday that the baht was appreciating relatively less than other currencies during the first week of the month despite the capital inflows in Asian countries.

He insisted the authorities would stabilise the currency to facilitate exporters but cautioned it would never see Bt40 again, while the Association of Thai Industries has asked the central bank to peg the currency at Bt38-Bt39.

Anoma Srisukkasem

The Nation