Most Asian currencies fell moderately on Friday, surrendering part of their gains from the previous session as investors fretted about the strength of inflation and prospects for slower economic growth.
Crude oil prices retreated below $131 per barrel on Friday from a record above $135 per barrel on Thursday on profit-taking, but analysts say inflation is a major threat to Asia.
"There are a couple of important themes: rising inflation and and central banks being behind the curve, still high oil prices, and some expectations of growth slowdown in Asia," said Thomas Harr, strategist at Standard Chartered Bank. "We have for a long time been calling for a correction in Asia-excluding-Japan currencies in the second to third quarter, and we are seeing the first signs of that now."
The South Korean won fell by 0.7 percent to 1,046.1 per dollar as importers such as refiners bought the U.S. currency for the settlement of imports despite retreating oil prices.
The U.S. dollar picked up slightly from a one-month low against the euro hit on Thursday, weighing on the Thai baht, which fell 0.6 percent to 32.08 per dollar.
The baht pared gains from recent sessions, pressured by dollar-demand from oil companies, but traders said the currency should meet with some support at 32.12 per dollar.
"Dollar/baht players are standing aside from the market and are reluctant to take large positions, allowing the market to become very thin," said a trader in Bangkok.
The Singapore dollar fell by 0.2 percent to 1.3619 per U.S. dollar after the government increased its forecast for 2008 inflation and an official said the island's economic risks had
shifted from growth to inflationary pressures.
The yuan eased a tenth of a percent below its previous close to 6.9460, but still held near its
post-revaluation high of 6.9430 touched on Thursday.
The Malaysian ringgit shed 0.2 percent to 3.2070 and traders in Malaysia said they expected the currency to be supported around 3.24 per dollar. Investors are also keeping an eye on
political factors after the country's long-standing former leader Mahathir Mohamad called on the current prime minister to step down.
The Philippine peso was an exception to the trend and rose by a fifth of a percent to recoup some of its heavy losses from Thursday, when it fell to its lowest level since since November 2007.