The Thai baht lost almost 1 percent on Friday as Asian currencies declined on growing expectations that central banks would sell their currencies to stem a rally that could hurt the region's exporters.
The baht weakened from a seven-month high against the dollar to about 39.48 per dollar. The Singapore dollar, the Taiwan dollar and the Indonesian rupiah lost more than half a percent each, following a 1.5 percent drop in the yen.
Central bankers and government officials in South Korea and Japan have issued repeated warnings they may intervene to stem a two-month rally in their currencies, which they say have become overvalued compared with economic fundamentals.
"Central banks across Asia will be wary of speculative attacks on their currencies," said Lian Chia Chiang, an economist at JP Morgan Chase in Singapore.
Still, Lian does not expect the dollar's weakening trend to reverse anytime soon. JP Morgan expects the baht to appreciate to 39 per dollar by the end of the year and to 37 per dollar by September next year.
The baht has underperformed most other Asian currencies this year, partly on concerns about violence in its southern region. The currency has gained 0.4 percent this year, compared with a 14 percent surge in the South Korean won and a near 4 percent gain in the yen.
Bank of Thailand Governor Pridiyathorn Devaluka said on Friday the baht was still competitive for exports.
Lian said the strength of Thailand's economy - which he expects to grow 5 percent in 2005 compared with 6 percent growth this year - and a broadly weakening dollar will help boost the baht's value next year.
The north Asian currencies and the Singapore dollar took a beating after South Korean President Roh Moo-hyun said in London on Thursday that the government was ready to guard against excessive currency moves and aims to co-ordinate such measures with other governments.
Data released Thursday showed the South Korean central bank had intervened in the currency market in November, although the Bank of Japan has stayed away from the markets since March.
Song Seng Wun, economist at Singapore-based G.K. Goh Securities said both central banks may use thin trading in the upcoming Christmas and year-end holiday season to sell their currencies and reverse the two-month rally that took the won to a seven-year high and the yen to a five-year high this week.
The dollar could also get support from the recovery in the US economy, which has forced the US Federal Reserve to raise benchmark rates this year. Most analysts expect the Fed to raise rates once more at a meeting this month.
Some traders who sold the dollar this month on concerns about the widening US current account and budget deficits reversed their bets ahead of the release of US non-farm payrolls data later on Friday. The US economy created 180,000 non-farm jobs in November, after 337,000 jobs created in October, according to the median of a Reuters poll of economists.
"There's a bit more resilience to the US economy than many people think," said Song.
Song said expectations for stronger US data and fears of Asian central bank intervention would stall the dollar's slide in the shorter term, although the longer-term forecast was for a further decline in the US currency.
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