THE Bank of Thailand (BOT) is out for revenge on George Soros ­ a Hungarian-born currency raider regarded as the number one threat to the stability of the nation's currency.

Soros is widely seen as one of the major players worldwide in attacking weak currencies for profit ­ and he has targeted the Thai baht.

The central bank wants to turn the tables on him ­ and has hurt him once already. Soros single-handedly brought the Bank of England to its knees in 1992, mounting an attack on sterling which caused it to fall 10 per cent against the German mark and resulting in it being taken out of the European Union's Exchange Rate Mechanism.

He walked away with an estimated US$1 billion (Bt26 billion) profit.

On May 15 and 16, the Soros hedge funds, armed with a war chest of $6 billion, laid siege to the baht ­ his second speculative foray against the currency this year. ''He is reported to have spent $2 billion to buy baht from the spot market into his portfolio," a banking source explained. ''Normally he will not attack without having built up his positions first. He still has $4 billion in three-month forward positions due in August.

''The main reason that the Bank of Thailand has closed down the swap market to create the two-tier baht system is to cut off his baht supply until then," the source added. ''They are out to destroy him."

Soros is president of Soros Fund Management and chief investment officer of Quantum Fund NV, a $12 billion international investment fund established 25 years ago and generally recognised as having the best performance record in the world. Taking advantage of rumours circulating of then-finance minister Amnuay Viravan's pending resignation and of Thailand's vulnerable macro-economic fundamentals, Soros and his pals sowed the seeds for their planned plundering ­ rumours of a baht devaluation.

Bank of Thailand officials later found out that a Citibank trader in Hong Kong further fuelled these rumours by spreading disinformation that the Charoen Pokphand Group, Thailand's largest conglomerate, had bought forward agreements to cover its $5 billion in foreign loans.

''Dhanin Chearavanont, the head of the CP Group, later clarified that he did not buy the forward agreements," the banking source said. ''The rumours were groundless. He didn't do it."

On May 15, the Soros hedge funds sold the baht short in favour of the US dollar, which sent the baht off the BOT's currency trading band ­ plunging from Bt26.00/US dollar to Bt26.70/US dollar.

''At Bt26.70, Soros began to reverse his positions by dumping the dollar for the baht until the baht reached Bt26.30 in the spot market.

''Then he stopped there. At this point, other currency traders with a herd instinct joined in the battle against the baht in a full-scale war," the source said.

The Bank of Thailand reacted by seeking the cooperation of the Monetary Authority of Singapore and they jointly intervened in the market, buying up the baht from every institution which was willing to short-sell the Thai currency. Malaysia and Hong Kong also bought up the baht.

It was the first cooperative currency rescue attempt by the region's central banks.

A confidential report by a Thai commercial bank chronicles the subsequent events in detail.

''By midnight, the real speculator [Soros] should have jumped out of the market by taking profits at 15- to 30-minute intervals.

''Throughout the night, the spot rate swung sharply between Bt26.00 and Bt26.65/US dollar, with dealers realising that the Thai central bank meant business.

''Some decided to take overnight positions," the report said.

The following day, Friday, May 16, saw the central bank issue a stern order, which barred Thai banks and foreign bank branches in Bangkok from selling baht to their offshore trading partners, effectively creating a two-tier baht system.

This cut off the foreign speculators' baht supply and they had to scramble for the currency in the spot market to cover their short-sale positions due on the Monday, May 19.

The report said that speculators began to sweat on May 16, because if they could not get hold of a supply of baht to deliver to the Monetary Authority of Singapore on May 19, they would be committing contractual default.

This meant they would not be allowed to conduct currency operations in Singapore and their reputations would be tarnished.

''We've been informed that about five dealers in Singapore were fired after this incident," said the banking source.

Finally, the Bank of Thailand released its iron grip by allowing Thai banks or foreign bank branches in Bangkok to act as brokers and lend the baht to the foreign speculators at a prohibitive cost.

This turned out to be equivalent to 400 per cent interest a year.

All the baht was supplied by the central bank, which took the profit while the local and foreign banks in Bangkok received commissions.

For those who bought the baht from the Bank of Thailand on May 16, the rate for onshore transactions was Bt25.81, compared with the offshore rate of Bt25.10 to Bt25.20.

This meant that the foreign speculators who could not jump out of the market in time lost several billion baht.

''Some lost $40 million to $50 million as a result of this," said the source.

But Soros still has his forward positions, which are due in August. He has until then to decide his next move ­ how to unload these positions.

The shutdown of the foreign exchange swap market has made the baht more costly on the offshore market.