The baht appreciation has eased its pace, but the central bank is warning the market and investors that new developments abroad could abruptly change the trend.
Prasarn Trairatvorakul, governor of the Bank of Thailand, yesterday ruled out special measures to stem the baht appreciation in the near term.
He said the central bank is monitoring the movements and stands ready to use all of its available tools.
The pace of the baht appreciation has been inconsistent since this year began _ rapid on some days and slow on others, said Mr Prasarn.
"Market players should be cautious now that signals for short-term speculation have become visible. They should not overlook global market factors such as news that could immediately change financial market trends," he said.
Mr Prasarn acknowledged the baht advanced rapidly against the US dollar earlier this week, with a noticeable surge in short-term speculation in local bonds.
But such short-term investment in the currency can change quickly, he said.
"The short-term inflows are a result of investors' reaction to prospects of economic recovery in economies such as the US and Japan. The US Federal Reserve recently announced the economic recovery in that country will take time," said Mr Prasarn.
The central bank chief said the baht appreciated more slowly than other regional currencies last year.
This was due partly to Thai investment portfolios and direct investment abroad totalling $8 and $10 billion, respectively, last year compared with total foreign capital inflows of $20 billion.
"We're still monitoring the baht. We will not commit ourselves to using or not using our tools at this stage," said Mr Prasarn.
"Market interventions incur cost. We'd like the foreign exchange rate to reflect economic fundamentals."
A dealer said the baht was trading at 29.78 to the dollar yesterday evening, a 10-satang appreciation from Wednesday.
Meanwhile, Finance Minister Kittiratt Na-Ranong said domestic pressure on the baht had eased, as the economy has not recorded several consecutive years of trade surpluses as previously.
Government plans for infrastructure investment will require imports and further ease pressure on the baht.
Local investors and businesses should seek import opportunities amid the appreciating trend, said Mr Kittiratt.
But he admitted the exchange rate is not at a good level and that exporters would face difficulties should the baht strengthen still further.
Meanwhile, Thiti Tantikulanan, the head of Kasikornbank's capital markets business, expects the strong pace of the baht to ease in the near term, reaching 29.50 baht to the dollar in the first half.
It has strengthened by 2.69% year-to-date compared with 0.5% to 1.5% for other regional currencies.
"If the baht strengthens past 29.50 baht to the dollar in the short term, then we would expect the central bank to do something and depart from its recent reluctance to intervene," he said.