Since 2 July 1997, Thailand has adopted the managed-float exchange rate regime, of which the value of the baht is determined by market forces, namely demand and supply in both on-shore and off-shore foreign exchange market, to let the currency moves in line with economic fundamentals. The Bank of Thailand will intervene in the market only when necessary, in order to prevent excessive volatilities and achieve economic policy targets. The floating regime enhances more flexibility and efficiency in monetary policy implementation, increases confidence of domestic and international investors, and improves foreign capital flow supervision.

To safeguard against potential instability and speculation in the currency market, the Bank of Thailand imposed a new measure on 29 January 1998 that baht-denominated credit facilities provided by each financial institution to non-residents, in case where there are no underlying trade or investment activities in Thailand, are subject to a maximum of B50 million per counterparty. On 4 October 1999, the Bank of Thailand clarified that the term "per counterparty" refers to all transactions taken by the head office, branches, representative offices and all affiliated companies of a particular non-resident to be counted as one. Non-residents who do not have any underlying trade or investment activities in Thailand are allowed to obtain Thai baht credit facilities from their on-shore counterparties up to a combined outstanding amount of B50 million.

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