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Bangkok, Dec 21: Bank of Thailand has defended measures to control the appreciation of the baht that wiped 23 billion from the value of Thai stocks, saying the rules will be removed once "volatility" eases.
"As soon as the volatility reduces, we will lift the requirement. This is temporary," Bloomberg quoted the bank's governor Tarisa Watanagase as sayinh.
The baht suffered its worst fall in more than seven years.
Tarisa announced currency controls on Monday to stem a 16 % rise in the baht. The measures prompted investors to dump Thai stocks and forced Finance Minister Pridiyathorn Devakula, who preceded Mr Tarisa as governor until October, to intervene by exempting equities from the rules, spurring a rebound in the benchmark Stock Exchange of Thailand (SET) Index.
"When it became a blunder, Pridiyathorn came to the rescue," said Thitinan Ponsudhirak, a political scientist at Chulalongkorn University in Bangkok. "This puts Tarisa in a tight spot. The stockmarket lobby will want some blood."
The finance ministry was informed the central bank would issue "a measure on the baht, but I didn't look into the details", Pridiyathorn told a press conference on Tuesday. The sharemarket slump was "a side effect of the central bank's measure, but we have fixed it already".
"I simply don't believe a central bank in the region would make a decision like this independently," said Julian Jessop, an economist at Capital Economics in London. "This is about as incompetent as it gets."
The central bank underestimated the impact of restrictions on equities because "they did it without talking to us", Thirachai Phuvanatnaranubala, the head of the Securities and Exchange Commission, said yesterday.
Tarisa, a three-decade Bank of Thailand veteran, said the central bank had no target for the baht's exchange rate with the US dollar.
Pridiyathorn yesterday said the foreign investment curbs were aimed to prevent the currency from appreciating beyond 35 to the US dollar.
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