Thailand's U turn

Issue
Thailand's military government imposed foreign exchange controls the "hot monies" on Monday and then did a partial reversal of some measures on Tuesday.

What is "hot monies"?
They are monies moving around the world looking to maximise its yield and/or secure capital appreciation.

The measure that captured the headline is the need for banks in Thailand to hold 30% of any foreign currency above USD20,000 for a year without paying interest.

Why did Thai government contemplate the moves in the first place?
To stem flows of such monies into country which had caused appreciation of Thai baht. The appreciation in baht would cause Thai's tourism and exports to be more expensive.

Consequences
The moves have caused losses to the tune of millions of dollars in the equity and bond markets over various exchanges.

Investors' confidence in investing in Thailand and possibly in the regional markets is shaken. Malaysia is still digesting the negative implications of the exchange control measures they did many years ago.