Singapore: Central banks in Thailand, India and South Korea stepped into markets once again on Tuesday to defend their falling currencies from a rallying dollar and foreign capital outflows spurred by worries over inflation.
Two traders in Bangkok said the Bank of Thailand had intervened again to help the baht recover from Monday’s 5-month low of 33.41 per dollar. The central bank also sold dollars on Monday.
“Intervention persists,” said a trader in Bangkok. “I think they want to repel speculators.”
The baht rebounded to 32.93 per dollar, up 0.9% from late Asian trade on Monday. It has fallen more than 3.5% in the past three weeks.
The won jumped 1% as two traders said the authorities were believed to be selling dollars. It hit levels as high as 1,020.9 per dollar, having at one point traded below 1,031.
The Reserve Bank of India (RBI) was seen selling dollars around Rs42.92 apiece after the rupee weakened on concerns foreigners may pull out more from local stocks amid growing risk aversion.
The rupee also recovered to around 42.90 from an early low of 42.93, but stayed weaker than Monday’s close of 42.87/88.
Philippine traders suspected the central bank there too had sold dollars to pull the peso back from 44.45 per dollar, its weakest since October.
Currencies in the region have been under pressure from rising oil and commodity prices, which have highlighted the pressures on trade and fiscal balances and raised concerns monetary authorities are behind the curve on fighting inflation.
There was further selling pressure on the regionals on Tuesday from the dollar’s broad rally driven by Federal Reserve Chairman Ben Bernanke’s remarks on the dangers from inflation.
“We expect this (intervention) to remain the main source of support for Asia FX in the near term, even if it may be temporary rather than a measure that will change the trend,” Lehman Brothers said in a note to clients.
Lehman said there would, however, be a divergence among the Asian currencies as a worsening growth and inflation backdrop weighed on portfolio flows, with currencies such as the Singapore dollar and Taiwan dollar expected to fare better than some of the others.