Deputy Finance Minister Phisit Lee-ahtam said the uptrend of the baht reflects growing confidence in the successful adjustment of the Thai economy, which has begun to see a ''light at the end of the tunnel''.

The baht yesterday continued its upward movement, appreciating by more than Bt1 to Bt44.60/US dollar on the back of buoyant sentiment of possible G-7 support to boost the regional currencies. The baht hit rock bottom at Bt56.90/US dollar in mid-January -- a devaluation of more than 50 per cent -- but has recovered ever since due to notable progress in Thailand's financial and economic reform.

''There is a light at the end of the tunnel but more hard work lies ahead,'' Phisit said in an interview with The Nation.

Last month, the Bank of Thailand sought to prevent the baht from sliding into the deep pit amid a reverse contagion effect from the meltdown of the Indonesian rupiah. Yet the financial markets quickly differentiated between Thailand and Indonesia, and a gradual wave of dollar selling on the back of buoyant sentiment helped bring the baht up to Bt50/US dollar.

This sudden rebound was not entirely a blessing, for some exporters, who eyed to get an exchange rate of Bt56 or Bt60, ended up losing money. This sharp currency volatility has disrupted trade and businesses, making it extremely difficult for exporters and importers to quote prices. ''If the baht keeps running like this, I don't know how to quote prices,'' one seafood exporter was heard saying.

The baht improved steadily this month, with Chaiyawat Wibulswasdi, the Bank of Thailand governor, signalling earlier this week that the monetary authorities would be happy to see the baht move in a narrower range of at Bt45-Bt48/US dollar.

Phisit said there were about five factors that helped improve the sentiment on the baht. First, he said, foreign investors have recognised that Thailand has successfully followed the International Monetary Fund-prescribed financial and economic reform programme in return for a bail-out fund of US$17.2 billion. The fact that the IMF has softened the austere economic programme for Thailand by allowing the Thai government to post a one per cent to two per cent budget deficit lends weight to evidence that Thailand has fulfilled the necessary conditions for reform.

Although the economy will face further distress in the first half of this year, conditions will improve in the second half with the government focusing primarily on bringing prices under control, he said. Earlier, Hubert Neiss, the IMF's Asia-Pacific regional director, also remarked that the Thai economy is expected to pick up in the second-half of this year, although overall growth will fall into the negative territory this year.

Second, Phisit said, the Financial Sector Restructuring Authority (FRA) is expected to function smoothly in its liquidation of the assets of the 56 defunct finance companies. Amaret Sila-on, the chairman of the FRA, has noted that the recoverable asset value from all of the 56 finance companies of Bt860 billion is expected to range between Bt360 billion to Bt590 billion, or 42 per cent to 68 per cent.

If the liquidation of these assets proceeds smoothly, it will create renewed confidence in the Thai economy.

Third, Phisit said, as much as 60 per cent to 70 per cent of Thailand's outstanding short-term foreign debts of $20.6 billion this year is expected to be rolled over. Half of the short-term debt, or about $10 billion, accounts for loans provided by Japanese banks, which are certain to roll over half of this amount lent to Thai-Japanese joint ventures.

Since most of the short-term debt, or debt with a maturity of less than one year, will be rolled over, there will be pressure of dollar outflows from the country between $6 billion and $8 billion this year. Phisit said the overall dollar outflow this year as a result of debt repayment can be sustained as confidence in the Thai economy grows further with the improved current account figures.

Fourth, Phisit said, investors have also recognised Thailand's tough decisions to turn around the problems in the banking sector. Recently, banking authorities nationalised four medium-size banks, which account for about 17 per cent of total assets of the banking sector. Tighter and more transparent rules on banking regulation in line with the IMF's third letter of intent are also expected to contribute to growing confidence in the banking sector.

Phisit said the authorities are working out ways to privatise the four banks -- First Bangkok City Bank, Siam City Bank, Bangkok Metropolitan Bank and Bangkok Bank of Commerce -- so they can be placed in good hands and not create financial problems for the Thai economy in the future.

Fifth, he said, Thailand's overall external accounts will be improving dramatically, with the export sector performing well. Prices in the agricultural sector will also be improving markedly this year, reducing the pressure for social unrest. This will signal to the market that conditions for an economic turnaround are falling into place.

According to a Bank of America report, the baht is expected to move upward, averaging Bt41/US dollar in the second quarter and Bt40 in the third quarter of this year. Over a 12-month period, the undervalued baht could hit Bt37/US dollar, the report said.