The Thai government Tuesday ruled out intervening in foreign exchange markets to prop up the baht as the currency slid through 44.00 to the dollar to a 31-month low.
"The Bank of Thailand is monitoring the situation and is responsible for the currency's level," Deputy Finance Minister Pisit Lee-atham told reporters.
"We should not allow the political side to intervene in the market."
The baht weakened further Tuesday on high local demand for the greenback amid uncertainty over the domestic political situation and no sign the central bank planned to step into the market.
Prime Minister Chuan Leekpai is expected to dissolve parliament early next month as his coalition government's term draws to an end: speculation over the likely election date has raged for months.
Pisit rejected suggestions the baht was plunging on heavy capital outflows and insisted Thailand's liquidity was in good shape.
He also said he was confident the baht's current weakness would not affect projections of a five percent increase in Gross Domestic Product (GDP) for 2000, boosted by strong exports and foreign direct investment.
"I am confident that our GDP (rise) will remained unchanged at 5.0 percent," he said before joining the cabinet's weekly meeting.
At 11:30 am (0430 GMT), the baht was trading at 44.06-14 against the dollar after touching 44.14 in early trade in active trading, Bangkok Bank dealers said.
After a public holiday on Thailand's financial markets Monday, the currency opened for trade Tuesday at 44.00 to the dollar.
"The local unit was only slightly weaker from yesterday but has fallen quite sharply since Friday," said DBS Thai Danu Bank treasury vice president Satain Tantanasrit.
"But we believe the central bank is monitoring the market closely," he added.
"In my view, the BoT's measures to curb speculation on the baht are working effectively. In the past six to seven months, the baht, despite having been subject to speculation, has not been so volatile."
In the short term he said he expected the baht to rebound slightly, possibly to 43.50 against the dollar.
But over the longer term he said the unit would continue to weaken on the back of political uncertainty, the BoT's low interest rate policy and the continuing strength of the dollar.
"The unit will continue to be unstable until the political conditions become stable ... with the general election," he said.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)