THE Bank of Thailand has ordered all 29 local banks not to buy back baht-denominated commercial papers from their offshore counterparts as part of a hardball strategy to cut off the baht supply to foreign currency speculators, dealers at foreign bank branches in Bangkok said.

Meanwhile, the central bank has closed the baht swap market, where trading is delivered at a specified time in the future, until it has rewritten permanent rules on how to prevent the currency from further speculative attack.

Foreign currency speculators, who are said to have lost badly in the currency battle because the swap market was closed, are struggling to borrow the baht from the onshore market in order to close their positions after they earlier shorted the baht against the US dollar. The attack sent the baht to a 10-and-a-half-year low.

''Since they have been denied access to the baht in the swap market, they have tried to get a hold of the currency by selling Thai commercial papers such as bills of exchange or floating rate notes," a banker at a European bank in Thailand said.

''Some foreign players have sold off baht-denominated B/E at 15 per cent and resold it to the currency speculators at 1,000 per cent ­ a quick 985 per cent differential profit," he added.

The shutdown of the local baht swap market, which sent the overnight rate to 1,000 per cent to punish foreign speculators, has effectively created a two-tier baht system ­ with onshore and offshore markets. With the high demand for baht among offshore players, the swap premium for the offshore baht market was offered at 130 per cent for a one-week period, while the bid stood at 50 per cent, the dealer said.

For a one-month period, the baht was offered at 55 per cent, against a 40 per cent bid, dealers said.

However, the interbank rate remained high yesterday, with the overnight and call rates standing at 15 to 17 per cent ­ little changed from Friday.

Even though the baht was stable yesterday, a dealer from Thai Danu Bank said trading remains quiet because the central bank has asked for cooperation in not quoting baht rates to foreign investors. ''We have to follow the Bank of Thailand's orders," he added.

In yesterday's spot market, US dollar/baht trading was quoted in a range between Bt25.82 and Bt25.90, while the Bank of Thailand fixed its mid-rate at Bt25.78, down from Friday's Bt25.82.

The TDB dealer noted that foreign speculators are paying a high price to buy baht in order to settle their positions. In addition, there has been talk in forex circles that foreign exchange dealers are reeling from their huge losses and some of them might lose their jobs.

One rate, known as the ''tomorrow/next" rate, rose to the equivalent of as much as 1,431 per cent a year early Friday. The baht/dollar one-month swap premium was still trading at the high level of 30 to 55 satang per dollar, unchanged from late on Friday.

Before the attack on the baht last week, the swap premium averaged between six and 10 satang per dollar. The six-month and 12-month swap premiums were at 65 to 100 satang and 110 to 160 satang, against 60 to 100 satang and 105 to 135 satang last Friday, respectively.

''It's good that they [speculators] are being punished," he added.

However, the TDB dealer said that trading control should not last too long as the trickle of foreign capital flowing into the country might dry up.