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BANGKOK : The Thai baht smashed a 13-year record against the US dollar on Thursday as the country's prime minister predicted continuing strength for the currency, while fears over the impact on exports persist.
The unit surged to 30.85 against the dollar -- its best since August 1997 -- as Prime Minister Abhisit Vejjajiva said further advances were not "beyond expectation".
"I cannot say that it will reach 29 baht but it's likely to get stronger," he said, adding that the Bank of Thailand was now closely watching the inflows of funds thought to be helping drive the baht's strength.
Thiti Tantikulanan, head of capital markets at Kasikorn Bank, confirmed the record had been reached early Thursday.
Thailand, in line with other regional neighbours, has seen its currency soar as robust economic growth and rising interest rates attract investors.
The baht has risen 7 percent this year so far, while the Malaysian ringgit is up 9 percent and currencies in Indonesia, the Philippines and Singapore have seen a 4.5 percent increase, Thiti said.
He said around 2.5 billion dollars have flooded into Thai markets, while a positive balance in trade driven by strong exports and a weaker dollar -- as the US recovery appears to falter -- have also helped boost the currency.
But the appreciation has raised concerns over competitiveness in a country where exports have been a crucial driver of economic growth and helped cushion the blow after violent street protests dented the key tourism sector.
Thanavath Phonvichai, of the University of the Thai Chamber of Commerce economic forecasting centre, warned of 100 billion baht (3.2 billion dollars) in lost exports and tourism -- or one percent of fourth quarter output -- if the rise went uncontrolled.
"There is no convincing sign from the Bank of Thailand on how to control the Thai currency," he said.
Federation of Thai Industries chairman Payungsak Chartsuthipol expressed concern about the effect on Thai exporters if the currency accelerates past regional neighbours.
"At the moment the Thai baht is strengthening in accordance with other currencies in the region, so I am not worried. But if only the baht gets stronger, we may face some trouble," said Payungsak.
The surging currency has exposed apparent differences in approach between the government and central bank.
After a meeting between the two last week Thailand's finance minister Korn Chatikavanij said the government had ordered the Bank of Thailand to monitor the baht and "prepare measures" to deal with a continuing if rise necessary.
But central bank governor Tarisa Watanagase said the appreciation matched other regional economies and more action was not currently needed.
In July the BOT upgraded its economic growth projection for 2010 to between 6.5 and 7.5 percent.
Last month policymakers raised the benchmark interest rate by 25 basis points -- for a second consecutive month -- to 1.75 percent after an unexpectedly strong performance by its economy. The July hike was the first in almost two years.
The country may also have seen a rebound from the negative sentiment caused by deadly street protests in April and May.
Thailand was rocked by two months of mass opposition protests, which paralysed parts of Bangkok and sparked clashes with security forces that left 91 people dead, ending with an army crackdown on May 19.
- AFP /ls
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