A central bank statement said the measure would take effect next Wednesday. The announcement is a stricter measure, as currently the BOT prohibits financial institutions from issuing and selling B/Es in baht to non-residents only for less than three months' maturity.

A source at the central bank said this was a proactive measure to control baht speculation but that the baht was currently quite stable.

"This is to prevent baht-denominated B/Es or supply of baht to non-residents," the source said.

The news of the new controls pushed the US dollar up quickly, from Bt36.63 just prior to the announcement to Bt36.73. Yesterday, the baht closed at 36.70/36.75 to the dollar.

The measure was launched after the BOT made a series of baht interventions in recent weeks.

In addition, the BOT statement said financial institutions were allowed to undertake foreign-exchange-related derivatives transactions with non-residents without approval from the central bank. The transactions, which are comparable with providing baht liquidity to non-residents or borrowing in baht from non-residents without underlying purposes of trade and investment in Thailand, are permitted for not more than Bt50 million per group of non-residents. Such a rule on borrowing without underlying trade and investment purposes shall be applied for a maturity of not more than three months.

The BOT also allows financial institutions to undertake interest-rate derivatives transactions with non-residents, provided the transactions do not take up the principal amount and payments to non-residents are in equivalent foreign currency. They are allowed to undertake equity- and credit-derivatives transactions with non-residents for risk management resulting from engaging in such transactions with domestic customers within the prescribed criteria.

Anoma Srisukkasem

The Nation