The crisis may have subsided for the baht, but commercial and investment banks caught out by Thailand's defensive moves last week are still feeling the squeeze - and face substantial losses, traders say. Some bank traders in Singapore and Hong Kong have taken a bath on the baht and some are rumoured to have been sacked. Thailand's central bank succeeded in quashing an attack on the baht last week by banning Thai-based banks from offering short-term baht funds to foreign buyers, creating a two-tier market. One rate is now quoted for onshore trades and another for offshore - if you can find a bank still willing to quote an offshore rate. Currency traders say only three foreign banks still make a market in baht, down from about 20. The rest have no access to baht or have been hurt enough to warrant pulling out of the business for now. Losses by some of the biggest market makers - Citibank, Union Bank of Switzerland, JP Morgan and Peregrine - are rumoured to be between US$20 million and $60 million each. Liquidity in the offshore baht market has nearly run dry. On an average day, about $7 billion worth of baht was traded in Singapore before last week's crisis, including swap market trades, Andy Tan of MMS International said. Now, less than $1 billion changes hands, traders said. Some Thai banks have stepped into the vacuum, however, skirting the central bank's embargo and providing funds offshore at interest rates 20 percentage points higher than domestic rates, traders said. The Bank of Thailand yesterday moved to plug loopholes in its abruptly implemented policy, making it more difficult for domestic banks to take advantage of the lucrative arbitrage, traders said. Most strategists felt the central bank would succeed in enforcing its policy, revoking bank licences if necessary. Its moves last week succeeded in cutting speculators off at the knees, with losses from hedge funds estimated at between $300 million and $400 million, traders said. The funds have yet to fully unwind their positions. Many borrowed Japanese yen at low interest rates to swap into baht and then sell, effectively creating a short position at relatively little cost. Where speculators did succeed in extricating themselves from short baht positions last week, many paid back their yen borrowings, selling US dollars for yen. That added fuel to this month's precipitous plunge in the dollar - increasing the financing costs of some speculators in the process. The dollar has dropped from a high of 127 yen on May 1 to a low of 112 yen on Tuesday. Some funds still hold forward contracts on the baht, giving them the right to buy baht at some date in the future, as a hedge on their short positions. Cashing in these forward contracts would ease some of the losses, but the Bank of Thailand's squeeze on offshore liquidity made that nearly impossible, traders said. 'Some of the hardest-hit hedge funds have been forced to liquidate profitable bond positions to make up for some of the huge damage they suffered from the baht,' one said. There were rumours yesterday that one US investment bank had sold a rather chunky position of 25,000 German bond future contracts, 'and that was not a call on the German economy', a trader said. There is no way of telling whether such a sale was done on behalf of a client - perhaps a hedge fund - or as a proprietary trade for the bank's own books. Nor is there any way of knowing how long the Bank of Thailand will enforce capital controls. Traders and strategists yesterday said the central bank was unlikely to lift its funds embargo until there were no speculators in sight. That could take as long as a year, one said. Yesterday, the central bank said the controls would remain but gave no date for their lifting. One currency strategist in Singapore said: 'This has cost them some [foreign exchange] reserves and the goodwill of some investors. They changed the rules on everyone.' Traders say last week's rescue operation cost the central bank $8 billion to $12 billion as the bank bought baht with a vengeance in the offshore market.