The South Korean won fell more than half a percent to lead declines in Asian currencies on Tuesday after a central bank official warned that the won's recent rapid gain against the Japanese yen was undesirable. The dollar's surge to a 14-month high against the yen in late Asian trading in anticipation of upbeat comments about the US economy by Federal Reserve Chairman Alan Greenspan hurt other Asian currencies such as the baht, dealers said.
Greenspan is scheduled to give semi-annual testimony to Congress starting on Wednesday.
On Monday, he said the US economy was set expand at a moderate pace despite soaring oil prices.
The head of Bank of Korea's international department, Rhee Gwang-ju, told Reuters that the won had appreciated too fast against the yen and the central bank was watching it closely.
Dealers in Seoul said central bank intervention and dollar buying by foreign equity investors drove the won to an intraday low of 1,042.0 per dollar, 0.7 percent lower than Monday's close. The currency closed local trading at 1,040.
"Lots of guys were short dollars at the start of the session. They're horribly scared about their position after the central bank warnings," said Roh Sang Chil, a dealer at Kookmin Bank in Seoul.
The won climbed to a seven-year high of about 9.17 per yen last week, heightening worries among local businesses that their exports would become less competitive against Japanese rivals.
The won has climbed 17 percent against the yen in the past 12 months. It fell to 9.3036 per yen on Tuesday. The baht, Asia's worst performing currency this year after the yen, lost further ground on demand for dollars from local oil companies. The currency weakened half a percent to 41.97 per dollar for a 7.3 percent loss this year.
"Oil firms were buying US dollars in the morning," said a Bangkok currency dealer.
Investors hoping for a rebound were discouraged after the baht failed to breach 41.70 per dollar level, he said.
DBS Bank said in a note the Bank of Thailand was under pressure to curb inflationary pressures and defend the baht ahead of a monetary policy meeting on Wednesday. A Reuters poll showed analysts expect a median 25 basis point increase in Thai rates. But DBS said the rise could be bigger. "We would not rule out the possibility of a 50 basis point hike to 3 percent, given the severe pressure on the baht and foreign exchange reserves," DBS Bank said.
Concerns about Indonesia's rising oil subsidies and growing budget deficit weakened the rupiah by a third of a percent to 9,819 per dollar.
Indonesia's budget deficit may rise to 1.3 percent of GDP this year from a targeted 0.8 percent if the oil price stays at an average $60 per barrel against a budget forecast of $45, Finance Minister Jusuf Anwar told reporters on Monday.
The Philippine peso lost 0.4 percent to 55.83 per dollar as the opposition prepared to impeach President Gloria Macapagal Arroyo for allegedly cheating to win last year's elections.
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