"If exporters accelerate selling their dollars, the baht will turn out to be stronger due to the misunderstanding. We do not want this cycle to start," Pongpen Ruengvirayudh, senior director of the Financial Markets Operations Group, said yesterday.

Exporters, who receive payment from buyers in dollars, might hastily sell the dollars if they worry that the rate in the onshore market would move closer to the offshore rate, but the two markets are distinct and their rates move independently, she said.

Fundamentally, the baht level in the onshore market is not influenced by its value offshore because the two markets are completely separated by the central bank's unremunerated reserve requirement.

Speculators cannot arbitrage the two markets because non-residents are not allowed to transfer money between accounts.

The baht's strengthening in the onshore market at the beginning of the week was due to the market mechanism rather than its performance in the offshore market. The onshore baht's climb was less rapid than the offshore unit, Pongpen added.

The offshore baht recently peaked at Bt32.90 to the US dollar before retreating to near Bt35 as demand for baht dried up at the end of this week.

The divergence between the two baht markets remains, with the spread varying according to supply and demand, she added.

Industry Ministry permanent secretary Chakkamon Pasukwa-nich said if no one smuggled the baht out of the country, the gap would eventually disappear.

The central bank warned exporters to be careful to calculate their prices with the onshore exchange rate.

If they misunderstand and give quotes in dollars based on the offshore rate, they might face unnecessary losses.

"The offshore rate is nothing. Exporters will not be able to sell [anything] if they rely on the offshore rate," she said.

Bank of Thailand assistant governor Nitaya Pibulratanagit said export income in terms of baht last year had not risen from the previous year despite the 17.4-per-cent growth of exports in dollar terms, as the baht had also gained 17 per cent last year.

Pongpen said the central bank had been looking for a proper way to lift its anti-speculation measure - the 30-per-cent withholding on capital inflows - in order to make the baht move smoothly. Timing is a very important factor that the bank has taken into account.

The central bank cannot project exactly where the baht will be at the time the measure is withdrawn, as its value depends on many factors including trends in regional currencies and the dollar level.

The baht might fly higher if the greenback continues to wane.

"It's not easy to exit [the protective scheme] because we do not know what will happen. But we don't want the baht to be jerked around when the measure is revoked," she said.

Anoma Srisukkasem

The Nation