Hong Kong: Oil extended losses toward $111 on Tuesday after Hurricane Gustav eased before slamming into the US Gulf Coast, pushing up the US dollar to a 7-month high against the euro and causing a broad selloff of commodities.

The South Korean won recovered after a steep decline on Monday, supported by the government which said in a hastily arranged meeting it had the will and ability to stop the currency from weakening.

However, stocks slipped further on fears about a flight of capital from Asia’s fourth-largest economy.

Economic deterioration and public unrest in the region continued to take a toll on its political establishment. Japan’s unpopular prime minister resigned late on Monday , which had a limited impact on the equity and bond markets, and a state of emergency was declared in Bangkok, which weighed on the baht.

Crude’s retreat, on top of a steep $4 fall on Monday, weighed on US corn and soy prices, which fell 3% after a US holiday on Monday.

The euro was down a modest 0.1% at $1.4583 after earlier dipping to around $1.4555, the lowest since February 14.

The British pound was down 0.5% at $1.7921 extending losses after an 8.6% plunge in August.

Japan’s Nikkei share average rose 0.45%, as lower oil prices encouraged investors to buy beaten down shares of companies in the technology sector after a sharp selloff on Monday.

Investors were grappling with the implications of Fukuda’s resignation, which made him the second Japanese leader to resign in less than a year and threatened policy vacuum as the economy hangs on the brink of recession.

South Korea’s KOSPI was down 0.1% after earlier slipping to its lowest since March 2007.

The country’s worsening balance of payments has made investors nervous that nearly $7billion of government bonds held by foreign investors maturing next week will not be rolled over.

The MSCI index of Asia-Pacific equities outside of Japan edged up 0.2% after earlier touching the lowest since March 2007. The index has fallen 28% so far this year.

Investors took refuge in the US dollar, shying away from slowing economic growth in Southeast Asia and in particular political uncertainty surrounding Thailand.

The dollar rose 0.4% against the Thai baht to 34.42 after Thailand’s prime minister declared a state of emergency in Bangkok and gave the army control to quell long-running protests.