GEORGE Soros and other international hedge funds are still locked in battle with the Bank of Thailand over about US$10 billion in currency forward contracts, while central bank governor Chaiyawat Wibulswasdi has flatly denied rumours that he and Soros will try to settle their positions at the World Bank/IMF meeting in Hong Kong.

''Instead, I'm using this venue to reassure foreign banks [about the country's stability] so that they will extend the maturity of loans [extended to Thai companies]," Chaiyawat said. He added that like other member countries Thailand would be at the meeting, which begins tomorrow, to report its economic development to other members of the IMF.

But financial sources said there had been attempts on the part of Thai finance and banking authorities to negotiate with Soros, the chief warrior of the baht attack, and other international hedge fund managers over the unwinding of their foreign exchange swap contracts.

Both sides have incurred casualties from their bloody currency battle in May, with their forward contracts still locked tightly against each other. Soros and the international hedge funds fiercely attacked the baht by selling it short against the US dollar.

The Bank of Thailand, which aimed to defend the baht at all costs, matched the attack dollar for dollar by selling the US dollar in the swap market for the baht to prop up the Thai currency.

A financial source indicated that Soros and the international hedge funds spent about US$10 billion to attack the baht on May 15, $3 billion of the money coming from the Soros fund and $1 billion from the Tiger Fund. All the big international houses, from Morgan Grenfell, Morgan Stanley, JP Morgan and Goldman Sachs to banks in Chicago, New York, London, Zurich, Franfurt, Hong Kong and Singapore had participated in tearing apart the central bank's currency peg system, the source said.

Soros, who heads the Soros Fund and Quantum Fund, and the international hedge funds did not have the baht in hand at the time they shorted the Thai currency, largely selling the baht for the dollar with contracts to deliver it in three-month's time. They hoped to pocket the profit by buying the Thai currency later at a lower rate ­ once the baht had lost value ­ to settle their positions.

The central bank used hardball tactics by closing down the foreign exchange swap markets to deny the speculators a big enough supply of baht to unwind their positions. At the same time, the central bank unwittingly depleted its foreign exchange reserves, which had been significantly running down from both the capital outflow and the costly baht defence.

The battle has produced a dilemma for both sides in that Soros and the hedge funds cannot lay their hands on the baht to unwind their positions while the central bank has also run out of the dollar to settle its forward obligations. Both sides have rolled over their forward positions because the positions were due in the middle of August.

After the signing of the IMF bail-out package worth $17.2 billion, the central bank was forced to disclose its forward contracts, which amounted to a shocking $14.8 billion, which would be due for settlement over the next 12 months beginning on Aug 21.

Dealers said that apart from defending the baht against foreign speculators, the central bank must also have built up its reserves to allow it to improve liquidity in the domestic market and keep the reserve figure at an artificially high level.

The central bank, they said, propped up its reserves by selling the baht for the dollar in the spot market and squaring its positions in the forward market. Eventually, the central bank, which appeared to be winning the currency battle in May, lost the war a month and a fortnight later when, with the potential of reserves running down below zero, it was forced to float the baht on July 2.

A well-informed source said that a week after the baht float JP Morgan had been mandated by Thai authorities to arrange a $5-billion syndicated loan to prop up the central bank's reserves.

Apart from helping the authorities to negotiate a roll-over of Thailand's short-term debts, JP Morgan was also to try to bring Soros and the other speculators on one side and the central bank on the other to meet half way in the settlement of their forward positions, the source added.

In the deal, which in the end did not take place, the central bank was to give Soros and the hedge funds the baht to settle half of their positions, while Soros and the hedge funds would reciprocate by giving dollars to the central bank to unwind its positions.

The source said the talks broke down after JP Morgan indicated that it would charge the central bank 0.5 per cent over the Libor (London Interbank Offered Rate) for the $5-billion syndicated loan, which would also involve European and Japanese banks. This rate put the credit rating of the central bank on par with Bangkok Bank, a rating the authorities would not accept.

However, the central bank's foreign exchange reserve position is weak, given the announcement yesterday that its reserves shrank by $2 billion to $25.9 billion in the two weeks ending on Aug 29. Analysts said this drop was masked by a $1.6-billion cash infusion from the IMF.

Soros and the hedge funds are gaining the upper hand because the baht has plunged by more than 40 per cent since the July 2 float, which is according to their game plan. The central bank, however, is under pressure to further build up its reserves.

''As long as Thailand cannot convince the international community that capital will be flowing back into the country, the foreign speculators will continue to short the baht and long the stocks," the source said.