Most Asian currencies are set to drop this week, led by the Malaysian ringgit and the Singapore dollar, on concern investors will exit emerging markets amid signs a global recession is deepening.

The ringgit is headed for its biggest weekly loss against the U.S. currency since June 2007 after reports this week showed industrial output fell the most since 2004 and exports had their biggest slide in almost seven years. Singapore’s dollar was set to complete its worst week since October after the government said the economy may shrink more than previously forecast.

“We haven’t seen the trough yet in terms of the declining economic trends,” said Zulkifli Hamzah, head of research at MIDF Amanah Investment Bank Bhd. in Kuala Lumpur. “The ringgit may be susceptible to short-term fund outflows.”

The ringgit traded at 3.5425 per dollar as of 12:12 p.m. in Kuala Lumpur, down 2.2% from 3.4662 at the end of last week, according to data compiled by Bloomberg. The Singapore dollar slid 1.7% to S$1.4785. The South Korean won, which lost 26% last year, Asia’s worst performance, slid 0.4% this week to 1,327.30.

Malaysia’s industrial production dropped 7.7% from a year earlier in November after a revised 2.9% decline the previous month, the government reported today. Exports fell 4.9% in November, according to figures released two days ago.

China, the world’s fourth-largest economy, will next week report a 5.3% slide in overseas sales for December, according to the median estimate of economists surveyed by Bloomberg News. That would be the largest decrease in more than a decade.

Deepening Recession

Singapore’s economy is forecast to shrink as much as 2% this year, twice the pace of a November prediction, the trade ministry said last week. Growth was 1.5% in 2008, the slowest in seven years.

The U.S. dollar headed for its first weekly loss against the yen in three weeks before a U.S. payroll report that may show the economy lost jobs every month in 2008 and the unemployment rate rose to a 16-year high. The U.S. currency traded at 91.23 yen in Tokyo, versus 91.83 at the end of last week and 91.15 late in New York yesterday.

South Korea’s won traded near a two-week low of 1,337.50 per dollar after the central bank cut interest rates to a record to revive growth in Asia’s fourth-largest economy.

Rate Cuts

The Korean currency is headed for a third weekly loss as a retreat in local stocks prompted foreign investors to sell more shares than they bought for a second day, according to Korea Exchange. The Bank of Korea trimmed its seven-day repurchase rate by half a%age point to 2.5% today, the fifth reduction since the start of the last quarter.

“Those who were betting on bigger rate cuts are disappointed,” said Oh Suk Tae, an economist with Citigroup Inc. in Seoul. “It’s premature to talk about a floor, or recovery for the markets and the economy.”

The Kospi index lost 1%, sliding for a second day.

“The currency market is swinging back and forth in tandem with price movements in stocks,” said Kim Jae Eun, an economist with Hana Daetoo Securities Co. in Seoul. “The first quarter will be the toughest for the market as the economy shows no signs of turning around yet.”

The economy is “deteriorating rapidly” as demand cools faster than expected at home and abroad, the central bank said in a statement today. Exports declined for a second straight month in December, industrial production fell by the most on record in November and confidence among manufacturers tumbled to the lowest level ever.

Elsewhere, the Indonesian rupiah gained 1% this week to 11,015 per dollar, the Thai baht fell 0.2% to 34.85 and the Philippine peso advanced 0.6% to 47.21. The Taiwan dollar was at NT$33.12, weakening from NT$32.86 on Dec. 31, the island’s last trading day before this week. Vietnam’s dong was at 17,476 compared with 17,483 at the end of last week. (Bloomberg)