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Thai coup keeps baht under pressure

A military coup in Thailand unsettled Asian stock markets on Wednesday and kept the embattled baht under pressure.

india Updated: Sep 20, 2006 15:09 IST
Agencies

A military coup in Thailand unsettled Asian stock markets on Wednesday and kept the embattled baht under pressure, while the yen firmed after weak US data cemented views the Federal Reserve would keep rates unchanged.

Energy and gold shares such as Japan's INPEX Holdings and Australia's Newcrest Mining dropped after oil and bullion prices resumed their slide, while Yahoo Inc's revenue warning knocked Japanese Internet stocks lower.

Latest US data including a fall in housing starts to more than three-year lows in August and unexpectedly weak producer prices bolstered the case for the Fed to leave rates steady at Wednesday's meeting, pushing Treasury yields lower.

By the mid-session, Tokyo's Nikkei fell 1.12 per cent as Internet stocks such as Yahoo Japan and Softbank Corp both lost more than 3 per cent. The Nikkei touched a 4-1/2-week low earlier in the session.

Yahoo Inc warned on Tuesday it expected third-quarter revenue to be at the bottom half of its forecast range due to weakness from two of its biggest advertising segments.

"The market has been somewhat aware that the Web market has matured, but this news has dashed any illusion of growth," said Norihiro Fujito, general manager at Mitsubishi UJF Securities' investment research and information division.

Also pressured, MSCI's broadest index of shares elsewhere in Asia slid 0.81 per cent by 0620 GMT.

The Thai armed forces seized power on Tuesday, dismissing Prime Minister Thaksin Shinawatra's government and promising a swift return to democracy after political reforms.

But analysts expect the Thai fallout to be short-lived, believing a repeat of the 1997/98 regional meltdown was very unlikely given the region's much sounder economic fundamentals.

"You get a knee-jerk reaction, which is to sell, but I would be very surprised if the Thai problem spreads to other countries in the region," said Malcolm Wood, regional strategist at Morgan Stanley.

The Thai stock market is closed on Wednesday after the Thai armed forces declared the day to be a government, bank and market holiday.

Indexes in Australia, South Korea, Hong Kong and Singapore all fell, but Taiwan's benchmark TAIEX was little changed.

Japan's INPEX shed 2.14 per cent, while Australia's gold producer Newcrest Mining lost 2.65 per cent.

On Wall Street, blue chip stocks inched 0.12 per cent lower, while the tech-heavy Nasdaq Composite Index fell 0.6 per cent, led by Yahoo's 11.2 per ent drop.

Baht Pressured

The dollar eased slightly against the baht, which suffered its biggest one-day fall in three years on Tuesday on the news of the coup.

It bought 37.65 baht, after topping at a 6-1/2-week high of 37.90 baht. Among major currencies, the dollar traded at 117.33 yen down from levels above 118 yen as expectations for the Fed to keep rates unchanged grew.

The euro was also softer against the yen, fetching 148.73 yen well down from recent highs above 150 yen, but it was little changed against the dollar at $1.2677

US crude was at $61.78 after resuming its steepest slide in more than a decade in US trade on Tuesday as high inventories eased supply worries.

Oil touched a low of $61.55 -- a level last seen in March. Tracking oil, spot gold slipped to a low of $572.30, nearing the three-month low of $571.20 set on Sept 15.

Japanese government bond prices rose on the back of firmer US Treasuries, pushing the benchmark 10-year Japanese government bond yield down 3 basis points to 1.665 per cent.

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