Fears that Thai officials are being pushed towards a baht devaluation sent shivers through Asian currency markets yesterday. The Indonesian rupiah and the Malaysian ringgit were sold in favour of Singapore dollars, the safe-haven Asean currency. Desmond Supple, economist at Barclays in Singapore, said: 'If the baht did ever go, funds would exit wholesale. Similarly, you would see big falls in the ringgit and rupiah.' Currency strategists drew parallels between the baht's precarious position and the Mexican peso crisis in 1995, which rocked emerging markets globally. In London, players were reminded of the collapse of the European exchange rate mechanism, sparked by an attack on the British pound in 1992. On that occasion heavy selling of sterling was blamed on hedge-fund operator George Soros, accompanied by significant corporate sales of sterling assets. Britain was forced to pull out of the mechanism as interest rates were pushed to levels beyond its pain threshold. As with the baht, the mechanism was based on a currency band, which was widened to the point of meaninglessness as the mechanism fell. For the baht, officials may be left with no choice to widen the band, but they would no doubt prefer to do it from a position of greater strength. 'Timing will be everything,' one trader said. The band was based in large part on the dollar-yen rate, which had been volatile lately. With this much pressure mounting against the baht, Thai officials needed a weak dollar to save their currency policy, the trader said. 'If the US dollar moves to 115 yen in the next couple of days, they might live to fight another day,' he said. If the dollar rose, 'they could still tough it out, if they are prepared to use interest rates to do it'. Overnight rates reached 18 per cent in Bangkok last night, climbing from 12 per cent in the early afternoon. There are fears that if Thailand caves in and devalues the baht, there could be 'tequila' effect in the region with speculators looking for other vulnerable currencies to attack, as they did after the Mexican peso crisis. Mr Supple said: 'If one of the tigers go, it could lead to an attack on other countries in the region.' He said speculators would likely target countries such as Thailand with large current account deficits, as in Indonesia and Malaysia.