The Bank of Thailand will monitor trading in the baht and review the impact of its tough capital control measures in mid-January, Bank of Thailand Governor Tarisa Watanagase said on Friday.
"Let it settle for a moment and then we will review what needs to be added or reduced," Tarisa told Thai radio station FM 98. "It will be to adjust the dosage of the drug, not to change the direction." Tarisa had said the central bank would spend at least three to six months studying the impact of the controls, which she has said repeatedly are only temporary.
In her latest comments, Tarisa said that sharp gains in the baht since Thursday were partly the result of a two-tier market, onshore and offshore, that had given market participants room to arbitrage between the two.
The baht has risen 15.8% this year against the U.S. dollar. Tarisa described the baht's renewed gains as an aberration of a two-tier market amid thin trading in the last week of 2006.
"There is now a two-tier market, meaning it is possible that there are efforts to exploit this. The offshore baht rate seems to have affected the onshore rate amid the current thin market," the governor said. "But this situation is in line with what we have expected as a result of the
measures announced last week. Bringing in funds now involves a 30% increased cost. We don't want to see too much foreign exchange volatility," she said.
The Bank of Thailand announced tough capital controls on Dec. 19 to restrain Asia's fastest-rising currency, but the move alarmed foreign investors and triggered a partial policy U-turn after a massive stock sell-off.
The Thai bourse plunged about 15% after the central bank imposed the measures aimed at curbing speculation in the baht.
The central bank said it had to act before the baht did serious damage to the country's exports, which are equivalent to 60 percent of Thailand's gross domestic product.