Mumbai: The US dollar, which received little support from the Group of Eight financial chiefs at the recent meeting, is likely to fall further even as currencies across Southeast Asia declined against an already weak dollar.

Rising inflation across Southeast Asia, pushed to the highest levels in a decade by rising fuel and food prices this month, has already eroded the values of most currencies in the region.

The annual rate of inflation in May peaked at 7.6 per cent in Thailand, 9.6 per cent in the Philippines, 10.4 per cent in Indonesia and 25.2 per cent in Vietnam, leading to depreciations of the Thai baht, the Philippine peso, the Indonesian rupiah and the Vietnamese dong against a weak US currency.

This forced Vietnam's State Bank to lower the official exchange rate of the dong almost two per cent. The bank also raised its prime lending rate from 12 per cent to 14 per cent.

Rising inflation fuelled by rising fuel prices is expected to push down currency values further and analysts expect further devaluations throughout Southeast Asia in coming months.

Vietnam, which has seen huge investment inflows in recent years, is now witnessing a widening of its trade deficit amidst rising inflation and a slackening of growth.

While the dollar has been falling against the Euro and some stronger Asian currencies for some time now, the Southeast Asian currencies are now taking a deeper depreciation against the weak dollar.

Asian currencies, which have seen steady gains against the US dollar, aided by rising foreign investments and strong exports, are now witnessing a shift towards falling currencies.

The depreciation of Southeast Asia currencies has more to do with the countries' growing dependence on the US economy rather than on a strengthening of the dollar, analysts say.

An Asian slowdown also seems inevitable so long as the region is not decoupled from the US economy, they contend.