Thai Central Bank Head Warns Against Big Baht Rise

The key to sustaining economic growth in Thailand is to keep the baht from rising too much against other currencies, although other steps are also needed, central bank Governor Tarisa Watanagase said Monday.

A recent surge in capital inflows into Thailand had led to a baht rise that was "detrimental to competition", Tarisa said at a symposium hosted by the Bank of Japan.

The baht was steady around 36.02 against the U.S. dollar in the Asian session, which compares with the 9-1/2-year high of 35.06 the day before currency controls were imposed in December.

Tarisa said earlier this month that Thailand had no plans to scrap the controls aimed at curbing speculation in the baht -- which rose against the dollar by more than any other Asian currency in 2006 -- but that she was prepared to make slight adjustments.

She said at the time that the Bank of Thailand planned to scrap an earlier rule that commercial banks should not sell bonds with a maturity of less than six months to foreigners because the new controls covered that.

Investments in mutual funds would not be excluded from the controls, under which 30% of non-trade-related inflows must be handed over interest-free for a year, with early withdrawal resulting in a stiff penalty, Tarisa has said.

Despite the abrupt removal of equity investments from the measure after the stock market plunged nearly 15% in a day, there was no time frame for lifting the controls, she said.

Foreign investors have still poured $235 million into Thai shares so far this year, seeing them as relatively cheap, after buying a net $2.3 billion last year.