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Removal of the controls is justified by several factors, including a strengthening economy and a greater balance in the foreign exchange market, Tarisa Watanagase told a press conference.

The central bank implemented a one-year, 30 per cent withholding requirement on many types of capital inflows in December 2006, in part to help maintain the competitiveness of Thai exports by restraining the value of the baht.

But the immediate effect of the measure was to trigger a massive sell-off on the Thai stock market, and critics charged that the measure discouraged foreign investment.

The reversal was announced just one day after ex-prime minister Thaksin Shinawatra returned home Thursday morning, ending nearly one and a half years of self-imposed exile.

Finance Minister Surapong Suebwonglee said Thursday afternoon that he might consult with Thaksin on the capital controls.

Speculation that the controls would be scrapped have already pushed the baht higher this week. The unit closed Friday at 31.96-98 baht to the dollar.

The baht traded at about 35.33 to the dollar when the controls were imposed.

A rising baht hurts exporters as its raises the foreign currency price of their products and lowers repatriated profits. It can also draw speculative foreign cash -- so-called "hot money" -- betting the currency will rise more.

The Nation, Agencies