The baht yesterday weakened to above 29 to the US dollar, while offshore investors pulled their money out of both bond and equity markets as they fretted over potential measures to be launched by the Bank of Thailand to rein in the local currency.
The baht fell to the day's trough of 29.18 to the dollar yesterday, the strongest level in more than a year, before bouncing back to 29.08/29.12 at around 6pm, easing from 28.91/28.94 Wednesday.
Foreign investors yesterday sold 6.59 billion baht and 1.82 billion baht more than they bought in the equities and bond markets, respectively.
The central bank yesterday said it will use its reserves to buy debt issued by state-owned companies abroad, according to Siri Garnjarerndee, a member of the board and the Monetary Policy Committee.
The goal is to diversify risks in foreign investment and raising investment returns. The bonds must be rated at least AA.
The market has widely speculated that regulators will either cut the policy rate aggressively or impose a tax on bond holdings.
A strong advocate of a policy rate cut, the Finance Ministry has stepped up calls for the move.
Prasarn Trairatvorakul, the central bank's governor, yesterday met with top officials at the Finance Ministry but declined to comment.
Central bank officials maintain the baht has been in line with regional currencies when considering the time frame since 2008.
It has appreciated more rapidly this year because investors have more confidence in the country's economy.
The central bank has prepared measures to address the baht strength when necessary and said the hedging ratio of exporters stands at 60% currently.
Exporters have argued the rapid baht surge has eaten into their margins at a time when the minimum wage increase to 300 baht took effect and global demand is fragile.
Areepong Bhoocha-oom, the finance permanent secretary, before the meeting said both the ministry and the central bank had discussed measures, but the ministry's position is for the central bank to consider cutting the policy interest rate as the preferred measure.
Other measures include a levy on foreign bond holdings.
Ariya Tiranaprakij, an executive vice-president of the Thai Bond Market Association, said one- to three-year papers were the best-selling tenures by foreigners yesterday, but their selling amount was not substantial.