Thailand > Bangkok > News

The Thai baht continued to hit new nine-year highs against the dollar (10-03-2007)

The central bank in December introduced stringent currency rules aimed at halting gains in the Thai baht, which has soared nearly 12 per cent over the past year. Central bank governor Tarisa Watanagase and Thailand's new Finance Minister Chalongphob Sussangkarn have repeatedly said the government would keep the currency meaures to rein in the rising Thai baht. But dealers said market players believed the opposite. "Investors see that the capital controls are only temporary measures and they don't believe what the authorities are saying," said a Bangkok Bank dealer. Sukhbir from Kasikorn Securities said investors were betting that the central bank could end the currency rules "anytime," adding repeated comments from financial authorities were only fueling ongoing speculation. The capital measures required 30 per cent of all incoming investment to be held by financial institutions for up to one year but foreign investors saw them as a steep tax on their equity investments. They quickly dumped shares, triggering a massive sell-off in December with market losses worth a staggering 23 billion dollars. Investors initially cheered Chalongphob's appointment as finance minister since the former World Bank economist had previously come out against the capital controls. But the new minister disappointed investors by saying Thailand still needed the capital rules to control the volatile currency.

Agence France Presse