Asian currencies take a beating as oil soars

Bangkok: The Indian and Thai central banks intervened on Monday to stem losses in the rupee and baht triggered by soaring world oil prices and more foreign selling in their respective stock markets.

The South Korean won down 9.4 per cent so far this year, also fell to a one-week low against the dollar although traders said they had not seen the central bank selling dollars to curb the decline.

The won recovered some of its early losses as investors remained on the lookout for possible government dollar-selling, but is expected to remain under pressure from high oil pri-ces and inflation that is likely to curb demand in Asia's fourth-largest economy.

The Bank of Thailand blamed foreign speculators for pushing the Thai currency to its weakest level in five months, although it is still up 1.35 per cent so far this year. "We've seen some speculation and we are watching it," Assistant governor Suchada Kirakul told reporters after the central bank intervened for the second time in two days.

The baht closed at 33.23/25 after earlier hitting a five-month low of 33.41.

"The baht has weakened too fast. Our economic fundamentals have not changed overnight," she said.

"We will try to calm the baht's volatility. We don't want to see a move in one direction," she said, reiterating comments she made on Friday. Suchada said the baht weakness was triggered by a sell-off in Thai shares last week, while importers of oil and other materials were still buying dollars on Monday.

Foreign investors sold a net 12 billion baht ($360 million) worth of Thai shares last week. They have sold 27.4 billion baht worth of Thai stocks so far this year as inflation soared to near 10-year highs and anti-government protests renewed fears of political instability.

Steep fall

Asian central banks have traditionally intervened to prevent currency appreciation, which hurts exports, the main driver of growth for most of the region's economies.

But the focus is now shifting to containing inflation, with oil prices at record highs near $140 a barrel driving up costs and fuelling demands for higher wages.

The Indian rupee, which has dropped more than 8 per cent since January 1, fell as low as 42.93 to the dollar from Friday's close of 42.66/67 after a decline of more than 4 per cent on the main stock index

Foreigners dumped $879.1 million of Indian stocks in the four days to Thursday, bringing their net sales so far this year to $4.8 billion.

The central bank was seen selling dollars around 42.93 to the tune of $400-$500 million, three traders said.

"There had been heavy sporadic selling by state-run banks around 42.93 levels and the message seems to have been clear to the rupee shorts: 'Don't take it very far'," one trader at a foreign bank said. The central bank usually intervenes via a few state-run banks.