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Published on March 5, 2008

Olarn, also an adviser to the Fiscal Policy Research Institute, derived his target value by comparing the Thai currency with other regional units.

Speaking to Money Channel in the aftermath of the removal of capital controls, Olarn said that between December 31 and February 29, the baht had strengthened from 33.68 a dollar to 31.52, up 6.4 per cent.

At the same time, the Chinese yuan went up 3 per cent, the Indonesian rupiah 3.3 per cent, the Malaysian ringgit 3.5 per cent, the Philippines peso 1.7 per cent and the Singapore dollar 3 per cent.

The baht yesterday was stable, opening at 31.60/31.62 to the dollar, and closing at 31.58/31.60.

Olarn suggested the authorities from now on should peg the currency at 32.50 to the greenback. But to keep it at that level may require spending about US$4 billion (Bt126.3 billion) to $5 billion in market intervention.

On Friday, Bank of Thailand Governor Tarisa Watanagase said the central bank had doubled the limit for foreign investment through institutional investors from $15 billion to $30 billion in order to facilitate capital outflows.

Recently, Finance Minister Surapong Suebwonglee said the ministry would refinance government foreign debt worth $3 billion.

However, regional experts believe the baht will appreciate to above 30 a dollar.

"We think a sub-30 trading range for the baht is now a strong possibility in the near term, particularly if we extrapolate this morning's session wherein market sentiment responded favourably to removal of the curbs," Jun Trinidad of Citibank said in the bank's report released yesterday.

Standard Chartered Bank has revised its forecast for onshore baht to 30.25 per dollar in the second quarter, stronger than its previous forecast of 33.25, and to 31 and 32 in the third and fourth quarters - from 33.5 and 34, respectively.

 "While the government is also expected to bring out new policies to curb baht appreciation, other near-term factors convince us that the outlook for onshore baht is positive," Standard Chartered said.

The Nation