Suchada cited figures from the Customs Department based on 40,000 exporting companies as an indicator that small and medium-sized companies with an export value of up to US$10 million (Bt353 million) are the group most affected by the appreciation of the baht.

Although they accounted for only 13 per cent of Thailand's exports, their number surpassed the large and medium companies.

Big companies hedged to cover currency risks at a proportion of 40 per cent of their transactions, medium-sized companies at 30 per cent, and small and medium-sized companies at only 10 per cent.

Medium-sized exporters with an export value of US$10 million to US$50 million accounted for 19 per cent of total exports. There are 300 companies in this category.

Large companies with an export value of more than US$100 million to US$500 million accounted for 24 per cent.

Companies with more than US$500 million in export value accounted for 34 per cent of total exports. But this group of exporters naturally hedged currencies to avoid risk. The baht started the day at Bt35.42 to Bt35.44 to the dollar yesterday before closing at Bt35.23 to Bt35.26 - the highest closing rate in nine years.

Analysts, however, predicted that the baht could still rise further and was stronger than other regional currencies as the US dollar weakened yesterday.

There were selling forces on the dollar from the offshore market.

According to United Overseas Bank's recent report, the greenback was dragged down by ex-Fed chairman Alan Greenspan's comment that he expected the dollar to move lower in the next few years and that it was "impudent to hold everything in one currency'. He said there was some evidence that Opec nations were beginning to switch US dollar reserves into euros and Japanese yen.

Greenspan's remarks appeared to be supported by the recent Bank for International Settlement (BIS) report showing that the share of US dollar liabilities to oil-exporting countries fell to 65 per cent in the second quarter compared to 67 per cent the previous quarter. However, the euro's share rose to 22 per cent from 20 per cent.

With data backward-looking and amounts not overly significant, markets have largely overlooked the BIS report. However, United Overseas Bank said it appeared to confirm sentiments that the Middle Eastern central banks could gradually shift "petrocurrencies" into alternative currencies such as the euro over time.

Benjawan Ratanaprayul, deputy director of the Department for Export Promotion, said the department would meet Thai exporters tomorrow to discuss the situation.

She said exporters of fresh fruit and vegetables had been badly affected because their products contained 95 per cent local content with a low margin of 5 per cent.

The rising baht would affect products with low imported content such as footwear, frozen shrimp, canned fruit and plastic garments.

Products likely to benefit from the rising baht because they contain high import content are steel, beer, fabric and threads.

Pakhorn Teetathawatchai, executive vice president of Siam Commercial Bank's treasury group, said the government should focus on the short-term problem instead of a long-term plan. The rising baht made it difficult for companies to maintain businesses. "In the long run, everybody's dead," he said.

Pakhorn said Thailand's foreign reserves rose from US$52 billion early this year to US$64 billion. Of that increase, US$10 billion was "hot money". He expected the baht would continue to swing in the first quarter next year.

Suchada said the baht's rise to Bt35.35 per dollar was a temporary phenomenon. She said the baht's real exchange rate was still competitive. The baht's effective exchange rate in 10 months of this year, compared to the rate in 2003, rose by only 11 per cent, compared to 19 per cent for the Indonesian rupiah, 24 per cent for the Philippine peso and 26 per cent for the South Korean won. The real exchange rate of the baht in 10 months this year was 8.6 per cent compared to 2005.

Santi Vilassakdanont, chairman of the Federation of Thai Industries, said the government's subcommittee should look into the flow of capital, to assist exporters.

Sathian Tanasarit, chief of treasury at TMB Bank, said the central bank should keep the baht at a similar range to other countries. He said Chile had successfully introduced measures to take care of short-term flows.

Meanwhile, in response to the rising baht, the Thai Chamber of Commerce has agreed to set up a special panel.

Secretary-general Dusit Nontanakorn said the instability caused by the baht's appreciation would cause a significant drop in exports within the next six months. The panel would help the government find measures to solve the problem.

Most exporters have quoted their prices for six months in advance and most exporters face problems to increase their quoted prices, Dusit said.

Anoma Srisukkasem

Somruedi Banchongduang

The Nation