The Bank of Thailand (BOT) should adjust its measures issued recently to control foreign capital inflows to avoid further negative impacts on bond market, according to an independent think-tank Thailand Development Research Institute (TDRI).

Thai News Agency on Thursday quoted TDRI's Chairman Chalongphob Susungkarn as saying that the central bank should keep supervising the capital movement in various markets, while reducing the 30-percent reserve rate imposed last Tuesday on short-term foreign capital inflows.

Chalongphob said Wednesday at a press conference that the central bank should find additional measures to manage the foreign capital movement in the country.

He said that short-term capital inflows into the country though accused by the BOT of driving the baht rise, would help to a certain extent boost liquidity in the money and capital markets and reduce lending costs.

Although the move by BOT to impose the reserve requirement managed to curb the baht speculation for now, it could cause extensive negative repercussions.

He suggested that the central bank should draw a lesson from the consequences of similar measures it took before the 1997 Asian financial crisis.

We should not forget the bank's all-out efforts to fight baht speculators 10 years ago almost depleted the country's international reserve, which led to the economic crisis," Chalongphob was cited as saying.

Although the bank's moves to deal with baht speculation for this time are not as intense as those in the past, it has caused an adverse impact on the capital market," he said.

Chalongphob proposed that the central bank eliminate the one-year minimum timeframe for foreign investors to hold their money before they can get the reserve refunded intact, as a reserve requirement is needed to curb baht speculation, and have the measure cover all kinds of capital markets, including stock and debt markets.

However, the central bank can immediately reduce the reserve rate to a low level, such as two percent, as a starting pointing, and then gradually increase it.

Chalongphob, also an economic adviser to the interim government,will visit Prime Minister Surayud Chulanont to discuss the issue and will also submit his recommendations to the central bank.

The BOT last week imposed its harshest anti-currency speculation measure since it floated the baht in 1997. All foreign capital inflows excluding investments in the stock market and foreign direct investments are subject to a 30-percent reserve to be deposited in the central bank without interest. Foreign investors could ask to withdraw the fund completely after it is maintained in the country for at least one year, or face a one-third reduction from the reserve money.

Thai Financial Minister and Deputy Prime Minister Pridiyathorn Devakula insisted that the measure was effective and widely appreciated by business operators, as it ensured that exports, the key driver of the country's economic growth, remain competitive.

The baht has fallen from its nine-year peak of 35.06 baht against the U.S. dollar early this month to 36.20-36.50 baht early this week.