The Thai currency peaked at 34.96 to the dollar in morning trade, up from Thursday's finish at 35.00-02.

"The baht broke the 35 level to the dollar this morning after exporters sold dollars heavily on worries that the Thai currency would get stronger after the central bank further eases capital controls," said a Bangkok Bank dealer.

"The Thai baht moved in the opposite direction as other Asian currencies, which fell against the dollar this morning," the dealer said, adding the baht was still trading at a nine-year high of 35.00-03 by mid-day.

The Bank of Thailand and the Finance Ministry were set to meet later Thursday to consider a proposal to allow investors to avoid a 30-per cent witholding requirement if their investments are fully hedged against changes in the value of the baht.

The capital measures sparked the biggest-ever one-day drop on the Thai bourse in December.

The plunge forced the central bank to quickly lift the regulations on money brought into Thailand to buy stocks, an embarrassing U-turn that damaged the government's credibility in the eyes of investors.

Most of the other controls have since been reversed or modified, creating some further confusion.

The baht, which rose nearly 12 per cent over the past year, got stronger this week on expectations that the new Finance Minister Chalongphob Sussangkarn would totally lift the remaining capital controls.

Chalongphob has previously come out against the capital controls but has sent conflicting signals on his policy since taking office last week.

Exporters expect the strong baht will hurt Thailand's overseas shipments which are targeted to grow by 12.5 per cent this year.

Exports are the main driver for Thailand's economy, which the government projects will expand 4.0-5.0 per cent in 2007.

Agence France-Presse