Yang is the brighter element. It symbolises masculinity, the sun, creation, heat, light, heaven and dominance. Yin symbolises femininity, the moon, completion, cold, darkness, material forms and submission.

The yin-yang concept holds a lesson for the Bank of Thailand. Ten years ago, when Thailand was facing a financial crisis, the central bank was under the influence of yang. Today, it is under the yin influence.

A decade ago, the central bank was headed by its 17th male governor, Rerngchai Marakanond.

Rerngchai took over on July 13, 1996, the year that foreign speculators began selling out the baht based on the belief that it would be devalued. With the currency under massive attack, Rerngchai declared a war to defend the fixed-exchange-rate regime at all costs, and depleted the country's foreign-exchange reserves in the process.

Today, the central bank is headed by its 21st - and first female - governor, Tarisa Watanagase, who took charge on November 8. Speculators attacked the baht again this year, but buying rather than selling in the belief that the currency would continue to rise against the dollar. However, Tarisa chose the yin way. She decided not to confront the attackers in the currency battlefield but to stay on home turf and raise an iron wall against the tidal waves of capital inflow.

The yin-yang concept could well explain the opposite circumstances faced by the Thai economy a decade ago and now.

In 1996, foreign hedge funds marched into the Kingdom to attack the baht, expecting that it would be depreciated. They were equipped with billions of dollars to sell out baht and force the central bank to abandon the pegged rate, then Bt25 to the dollar. At that time the Chinese economy had not fully embraced globalisation and US economic growth was strong.

In 1997, yang came into play. The BOT declared war on the speculators and defended the baht aggressively. Unfortunately, the central bank lost and ended up abandoning the pegged-rate regime. By the end of 1997, net international reserves had reached the historic low of US$8.9 billion, compared with $38.72 billion at the end of 1996. The value of the baht was cut by a third in a matter of days.

In 2006, foreign funds have been flocking into Thailand to reap profit from the capital market. The baht's gain has been ahead of the curve of other regional currencies. Speculators bought the baht amid expectation that it would rise further, possibly to its pre-crisis level. In response, Tarisa adopted passive measures to defend the currency. But by December 18 the baht was 15-per-cent higher against the dollar than a year ago.

When Rerngchai ran the central bank the overall economy was in reverse mode. Thailand was running a current-account deficit of 7-8 per cent of gross domestic product. It was saddled with huge foreign debts of more than $100 billion, with short-term loans accounting for more than half. Speculators bet the central bank would have no choice but to devalue the baht. Rerngchai's all-out war with the speculators ended with Thailand being forced to surrender economic sovereignty in exchange for financial assistance from the International Monetary Fund.

On the other hand, Tarisa intervened only moderately in the foreign-exchange market, bringing the reserves up to $64.7 billion with future income of $9 billion from forward obligations.

While her male predecessors would not hesitate to take risks, under Tarisa the Bank of Thailand makes decisions conservatively by always weighing the loss. Tarisa is apparently reluctant to amass foreign reserves, for fear of having to issue bonds to absorb the money at a loss from high interest rates.

On December 19 Tarisa instead introduced the Draconian measure of a 30-per-cent withholding requirement on all foreign capital to halt the baht speculation. The move caused the biggest crash in the stock market's history and prompted criticism that Tarisa had given too much weight to the central bank's financial status at the expense of the stock market.

Critics have said Tarisa should have declared war on the speculators, as Rerngchai did in 1997, adopting the active element of the yang. But then, at that time some also wanted Rerngchai to adopt the passive principle of yin by not engaging in all-out war with the speculators. So it all comes down to the basic concept of balancing two opposing forces - choosing when to be passive or active during times of crisis.

Perhaps it's time for the Bank of Thailand to learn to apply both principles in managing the currency. Tarisa may have to rethink her strategy to strike the right balance between yin and yang.

Anoma Srisukkasem

The Nation