The central bank also admitted yesterday that it had been intervening in the foreign-exchange market occasionally over the past week to stabilise the baht.

The Thai currency has strengthened significantly at around Bt0.20 per day against the dollar over the past week, mainly due to short-term inflows. The baht opened at Bt35.81 to Bt35.86 per dollar yesterday and closed at Bt35.87 to Bt35.89, after peaking at Bt35.74 during the day.

A dealer from Bangkok Bank said the central bank had intervened between 3pm and 4pm to bring down the value of the baht by Bt0.30. He believes the unit will appreciate further next week, with a likely range of Bt35.50 to Bt36.10.

Pongpen Ruengvirayudh, the Bank of Thailand's senior director of the Financial Markets Operations Group, said yesterday the central bank would soon introduce a new measure, but declined to disclose the details.

She said the planned measure would be suitable for the current situation in Thailand.

"It is the kind of measure that solves the problem at its roots," Pongpen said.

She said the central bank would prefer medium-term investors rather than hot money, as the latter flows in and out quickly.

Short-term money helps boost market volume, but also brings about higher costs for exporters, she said, adding that the margins of some exporters are quite thin.

The Stock Exchange of Thailand Index rose 2.41 per cent from 723.87 points last Friday, to close at 741.38 yesterday.

Pongpen said the central bank believed the new measure would not destroy the trade and investment atmosphere as it will carefully implement it without any impact on real investors who are not speculators.

She said the central bank had studied several measures suitable for the current situation, before making the most appropriate choice.

Nitaya Pibulratanagit, the assistant governor, said yesterday the strengthening of the baht was due to a combination of the weakening of the dollar, the current-account surplus, and speculative activity.

The dollar has weakened to its lowest level in more than 14 years against the pound, and the lowest in over 20 months against the euro.

She revealed that the central bank had intervened in the currency market several times to stabilise the baht. Over the past few days, there have been huge capital inflows into the Thai market.

In addition to the new measure to control speculative inflows, Nitaya said the central bank would also urge banks not to issue bonds to non-residents.

Over the past few days, non-residents, who are speculators, have sold and bought back bonds from banks for huge amounts. With this transaction, speculators lend baht to banks that then issue bonds to them. Non-residents commit to sell back the bonds to the banks within a short period.

Pongpen also said that selling and buying back bonds was similar to an earlier transaction, whereby non-residents would sign a repurchase agreement with banks for the extension of baht loans to these banks.

"We would ask banks to cooperate in this issue as well," she said.

Pongpen said there were several forms of baht speculation. Some speculators have parked their money in non-resident accounts in order to withdraw them after the baht appreciates, while others just speculate on the baht by buying the Thai currency in the morning before selling it in the afternoon.

Some invest in bonds or the stock market before selling the bonds and stocks later.

"We can figure out that they are speculators only by seeing their names," she added.

Anoma Srisukkasem

The Nation