The baht yesterday surged to a nine-year high at Bt36.05 against the US dollar, prompting the central bank to intervene in the market apparently out of concern that a too strong baht would further dampen the country's export outlook.

The Thai currency opened at Bt36.31-Bt36.33, and ended at Bt36.11-Bt36.13, down marginally from the day's high thanks to intervention.

At one point, it touched Bt36.05 - a level last seen in 1998.

"It was apparent that the Bank of Thailand intervened in the market in several rounds. Without intervention, the baht could have strengthened to above the Bt36 level," said a dealer at a Thai commercial bank.

Commerce Minister Krirk-krai Jirapaet said yesterday he would soon ask Deputy Prime Minister and Finance Minister MR Pridiyathorn Devakula to launch fiscal measures to help Thai exporters whose income will drop sharply if the dollar income is converted into baht.

Amid the exporters' cry for help, BOT Governor Tarisa Watanagase said yesterday the central bank would try its best to curb the volatility in the foreign exchange market.

However, there are limits to what central bank intervention could accomplish because there are costs for foreign exchange intervention, she said, adding that Thailand's international reserves were "not as high as other countries".

"We will continue to take care of the foreign exchange market if it's too volatile," she said, "but we can't act against the mechanism of demand and supply."

Tarisa last week warned exporters to hedge their foreign exchange risks because there is a limited chance for intervention. And yesterday, she said the central bank is likely to implement some measures to soften the baht.

They include extending the period for foreign currency holding of exporters from seven to 15 days, and abolishing the requirement on foreign investors to show evidence for what purpose they park money in currency deposit accounts.

It will also raise the minimum amount of offshore investment by onshore players that doesn't require central bank permission from the current US$10 million (Bt360 million), although she did not specify the new minimum.

The central bank has raised the limit on the size of foreign currency deposit accounts of those businesses to US$50 million from US$10 million previously.

Tarisa noted that the private and public sectors needed to work together to lower the operating cost.

For example, the agricultural sector, which suffers more from the strong baht than some industries that import raw materials, should find ways to add value to its output.

"We understand that the structural change is not easy - but it is necessary. The longer this is delayed, the wider our competitiveness gap will be," she said.

To the dismay of exporters, the baht has been strengthening for weeks due to huge inflows into the stock and bond markets, as well as foreign direct investment.

Tarisa noted that how long the money stays in Thailand depends on foreign investors' confidence in the Thai economy.

According to dealers, dollar trading volume was high as exporters wanted to cut their losses by selling dollars - while some importers stocked up on the cheaper dollar. They expect the baht to move in the range of Bt36-Bt36.36.

So far this year, the Thai baht has appreciated 12 per cent against the US dollar.

Meanwhile, Krirk-krai said fiscal policies should be exercised to lessen the impact on exporters when the central bank's intervention is limited.

However, he did not disclose any details about the fiscal measures.

The Finance Ministry expects that export growth in dollar terms next year should decelerate to 9.2 per cent compared with 11.2 per cent this year. Imports in dollar terms next year are expected to rise between 9.6 to 11.6 per cent.

The Commerce Ministry will formally announce next year's export target next week. Export growth target this year is 17.5 per cent.

Krirk-krai said the ministry would try to improve research and development (R&D), logistics and reduction of production costs, in order to boost exports to meet the planned target, instead of allowing exports to grow naturally.

He expressed concerns over risk factors on the Kingdom's exports and questioned the global economy, particularly the US economy's problems and how the US will handle the dollar. The European Union continued to strictly keep its spending and non-tariff barrier policy, and ignored decreasing the global imbalance.

The minister believed the Doha-round of talks of the World Trade Organisation would not be to close down its curtain because many countries wanted to protect their agricultural sector. As a result, the Kingdom must find ways to help boost exports such as seeking co-operation from Asean countries or FTA negotiations.

"The government should make a decision whether to proceed with the FTA talks. It is a public policy that wants brainstorming. The government must listen to people's opinion if they do not want the FTA. It is not measured by merit but by the largest voice," he said.

Anoma Srisukkasem

The Nation