Pridiyathorn said the panic should be short-term, even though he later noted that the stock market's reaction was more severe than he initially thought. 

"The measure is proven to be effective as the baht has stopped appreciating and is starting to ease today," he said.

Other key economic ministers - Deputy Prime Minister and Industry Minister Kosit Panpiemras and Commerce Minister Krirk-krai Jirapaet - yesterday fully backed the central bank's decision, saying it was necessary. Pridiyathorn said earlier in the day that the government would not reconsider the anti-currency speculation measure that spooked investors and plunged the SET index nearly 19 per cent at one point yesterday.

"The government will not reconsider the policy. Let the market take its course and it will adjust itself," Pridiyathorn told reporters, adding the measure would only affect brokers and short-term currency speculators. "Inflows have been too large, causing excessive baht strength and hurting exporters. At this point, we need to take care of the economy first and investors later."

He said the inflows through the short-term commercial papers were as large as Bt100 billion within three weeks. "The Bank of Thailand had no choice since we have found that there was speculation in short-term debt instruments," he said.

Pridiyathorn said the SET plunge was greater than expected, but the sharp fall would mean a quick adjustment, which would soon stop as investment returned.

He said the government had no plan to intervene in the market. He expected the market would be back in shape after falling for another one to two days.

Pridiyathorn said the authorities would assess the impact of the new measure.

Nitaya Pibulratanagit, the central bank's assistant governor, said yesterday the Bank of Thailand was looking for ways to reduce the effects of the 30-per-cent withholding requirement on other markets.

However, the central bank does not plan to remove the measure entirely.

Yesterday, Nitaya held an urgent meeting with fund managers and brokerage firms at the central bank to discuss the issue. She added that foreign investors could shift their capital as usual. They can also park their money at the non-resident baht accounts or shift to buy baht bonds.

Nitaya admitted after her meeting with brokerage companies and fund managers that stock prices had fallen deeper than expected.

"After listening to brokers, we must introduce measures to soften the rules quickly, but I can't say when we will do that."

She said if the baht stopped accelerating as it had in the past few weeks, the central bank may stop the measure or seek a new measure with less impact, depending on the situation.

Kosit said yesterday that there was a need to consider the impact of the measure, particularly on business operators. The central bank would like to stabilise the baht without the government's intervention, he said.

Kosit believes the volatility from the measure's impact would be temporary.

Commerce Minister Krirk-krai Jirapaet said: "Of course, people are wary about the drop of the SET index by 100 points. Such worry affects the overall economic picture."

But he said it was the right thing to do to ward off speculation. "The measure is welcomed," he said. "I hope investors' confidence will come back to normal."

He added that it was necessary to introduce the measure to solve the problem at its root. "The government didn't want to see the baht over-appreciate. The government wants to stabilise the baht," he said.

Suchart Sakkankosone, the central bank's director of exchange control and credits, insisted yesterday that the measure to withhold foreign investors' 30 per cent of capital inflow was not a capital control.

"Investors are still able to invest further in the Kingdom. We didn't prohibit them from taking their money out," Suchart said.

He said it would take some time to consider the impact of the new measure and it was normal that the market would panic after the measure was introduced.

The Nation