THE value of the baht is determined 90 per cent by the weight of market forces, reflecting the Bank of Thailand's resolve to minimise as much as possible its foreign exchange intervention, Deputy Finance Minister Pisit Lee-ahtam says.

''In principle, the Thai foreign exchange rate should be determined by the market force, which is something that has been happening over the past four to five months,'' Pisit said.

Pisit's comment came in response to growing criticism inside the country over the wisdom of keeping the interest rate high to defend the currency at the cost of undermining the competitiveness of exports and killing the real sector of the economy.

But Pisit was quick to remind that it was not until February this year that the Thai macro-economy began to improve. On Jan 12, the baht hit rock bottom at Bt55.50 to the dollar, with panic-stricken Thais and foreign investors fearing that it was heading for a free fall to Bt60, Bt70 or even Bt80. Then turmoil was flaring up in South Korea and Indonesia, forcing Thailand to try to de-couple itself from the two troubled economies.

By March the baht had stabilised at Bt40 before strengthening further to Bt39 in April. It was during March and April, according Finance Minister Tarrin Nimmanahaeminda, that the banking authorities rebuilt their foreign exchange reserves by buying US dollars. In doing so, they sold out the baht to prevent it from strengthening further.

With Tarrin's remark, it can be deduced that the exchange rate of Bt38-Bt39 is the base line beyond which the Thai authorities will intervene to prevent it from rising too high which might not be in line with Thailand's economic fundamentals. According to an official source, the Bank of Thailand's frantic buying of the dollar at that time raised eye-brows of an International Monetary Fund representative, who asked: ''What's going on?''

When it was explained to the IMF representative that the BOT was aiming to rebuild its foreign exchange reserves and wanted to prevent the baht from rising too high, the IMF representative acknowledged the move.

According to a Finance Ministry document submitted to the Cabinet on Tuesday, the net foreign exchange reserves of the country grew by US$5 billion from $6.4 billion in November the day the Democrats took over the administration to $11.4 billion in May. When Thailand sought a $17.2-billion rescue programme from the IMF in August 1997, its net foreign exchange reserves had almost been depleted by the costly baht defence, hitting $800 million from a far cry of $38 billion at the end of 1996. A roll-over of the foreign debts by about 70 per cent in the final quarter of 1997 also reduced the pressure of the dollar outflow and the pressure on the baht.

A steady increase in the net foreign exchange reserves of the Bank of Thailand since its adoption of the IMF support programme also supports Pisit's remark that the banking authorities have been trying at best to refrain from intervening in the foreign exchange market to prop up the baht. However, in January when the baht was about to collapse in another round, the banking authorities did intervene frantically yet very subtlely to bring it back to a more stable path, according to official sources.

In June 1998 with Japan heading into a full-blown banking and currency crisis, the Thai baht could not avoid the impact, falling back to Bt42-Bt43 to the dollar on the bearish regional sentiment.

Tarrin has also argued that bringing down interest rates was also the objective of the Finance Ministry but it will have to take into account the overall prudent fiscal and monetary policy. Indeed, the overnight rate has been steadily falling from 24 per cent in December last year to 17 per cent in May before it was brought back up to 19 per cent in June to defend the baht during the yen crisis. Now the overnight rate has been on a steady downward trend, hitting 15.375 per cent on Thursday morning.

At the end of June 1998, the Thai baht depreciated by 39 per cent against the US dollar compared to the pre-floated exchange rate on June 30, 1997. At this level, the baht and the Malaysia ringgit, which also depreciated by the same 39 per cent to the dollar, were second after the Indonesia rupiah, which lost 84 per cent of its value to the dollar during the same period. The South Korean won shed 36 per cent, compared to 37 per cent for the Philippine peso, 20 per cent for the New Taiwan dollar, 19 per cent for the yen and 16 per cent for the Singapore dollar.

The Hong Kong dollar is almost unchanged to the US dollar due to its strict adoption of a currency peg through a currency board system.

On Thursday the baht traded at Bt41.28-40, stuck between Bt41.00 support and Bt41.60 resistance, according to Citibank's daily report. ''The bias is still to sell upticks, with Bt42.10 marking a double top. There was outright selling on yield play given that many accounts believe US dollar-Thai baht has stabilised around the present levels,'' it added.