She said the central bank was trying only to reduce the volatility of the baht without a huge concern about the rising cost of baht intervention in the short term, realising that the fluctuating baht would mean increasing operating costs for the private sector and thus overall higher economic costs.

"If we stop the baht's fluctuation, it means we fix it at a particular level. A fixed rate would create the risk of a baht attack," the governor said. Thailand once had a fixed-exchange-rate regime, she said, but that was not in line with economic fundamentals.

She said the baht's strength partly indicated the country's good economic fundamentals but the undesirable hot money put the currency off track.

Tarisa said the three measures taken by the BOT last week had a good chance of success as long as the baht moved in line with other regional currencies.

However, the BOT will continuously intervene in the foreign-exchange market if the baht becomes very volatile, the governor said on the sidelines of a seminar hosted by the Thailand Development Research Institute.

The central bank has been encouraging Thai investors to invest abroad in order to reduce pressure on the strong baht and discourage the speculative inflow of the past weeks.

Tarisa said capital inflow this year had largely been foreign direct investment, which would generate new production, construction and employment.

It partly flowed into the Thai bourse and the debt market but was not enough to encourage a bullish market, she said.

"The baht is not under attack by hedge funds as in the 1997 financial crisis. The appreciating baht is caused by the inflow due to Thailand's firm economic fundamentals, along with those of other Asian countries," she added.

Anoma Srisukkasem

The Nation