Most Asian currencies fell on Tuesday - the Indonesian rupiah and Korean won being the biggest losers - weighed down by high oil prices, falling stock markets and the Japanese yen's failure to extend its rally.
The Indonesian rupiah fell about 0.9 percent to a 3-1/2 year low, shrugging off increasing rhetoric from the authorities, new policy measures and central bank dollar sales.
The won fell about half a percent to around 1,029 a dollar on foreign selling of South Korean equities and dollar demand after Dubai-based Sovereign Asset Management sold its stake in Korea's LG Electronics Inc and LG Corp.
Analysts said an additional factor weighing on some of the Southeast Asian currencies was the Malaysian ringgit's weakness. The ringgit fell to 3.7710 per dollar, its weakest since just after being floated on July 21.
"The market is not trading close to the majors," said Jimmy Koh, head of research at United Overseas Bank.
"They don't expect the ringgit or the yuan to appreciate much anytime soon and are busy getting out of positions."
Koh said the continued upward pressure on oil prices was also a worry for oil-importing Asia. Global oil prices were near $66 a barrel on Tuesday, just off record highs over $67.
Some regional stock markets fell as well.
Analysts said they had seen an outflow of portfolio funds from parts of Asia into Japan, encouraged by improving economic data and growing public support for Prime Minister Junichiro Koizumi and his economic reform plans ahead of a September 11 general election.
The yen traded in a tight range close to 110 per dollar in afternoon deals, barely moving even though Tokyo stocks recorded their highest close in four years.
The rupiah was undermined by dollar demand from oil importers and a feeling among traders that authorities were not doing enough to defend the currency.
It was traded at 10,125 per dollar, extending its decline this month to over 3 percent and losses this year to 8 percent.
Traders said Bank Indonesia sold dollars through state-run banks.
The central bank urged exporters to park their earnings with banks onshore, and also offered another 3-day deposit facility to mop up excess interbank funds that could otherwise be channelled into speculating against the rupiah.
Senior government officials rejected market talk that state oil firm Pertamina was no longer getting dollars directly from the central bank and said that arrangement, in place since July, was intact.
Analysts said the policy measures were inadequate given the growing demand for dollars from oil and other importers, and that interest rates needed to be raised more aggressively.
"The issue for Indonesia is clearly that of too little, too late," said Wong Keng Siong, economist with Bank of Tokyo-Mitsubishi.
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