Asian currencies tumbled this week, wiping out this year's gains in the Singapore dollar and South Korean won, as losses linked to the subprime market sparked the worst five-day decline in the region's stocks since 1990.
The Indonesian rupiah, down 4.9 percent since the start of the year, slid to a one-year low this week, prompting the central bank to buy the currency. By contrast, the Bank of Korea on Friday welcomed the won's worst week in two years, saying the currency has returned to a "normal" level since slipping from a 19-month high last month.
"Investors are rushing to safe havens and getting out of Asian currencies," said Katie Dean, senior economist at Australia and New Zealand Banking Group Ltd in Melbourne. "Subprime problems look to be spreading to other parts of the financial system."
The won fell 2 percent this week to 950.40 against the US dollar, the biggest drop since the five days ended July 8, 2005, Seoul Money Brokerage Services Ltd said.
Against the yen, the South Korean won closed down 30.2 won at 844.6 won to ?100.
Overseas global funds pushed regional share indexes down this week. Investors offloaded US$1.1 billion more Korean stocks than they bought on Thursday, the most since at least 1998. Funds also sold equities in Taiwan, Philippines and Thailand.
The New Taiwan dollar rose by the most in more than a year on speculation the central bank bought the currency.
The local currency's advance on Friday erased the week's losses. A weaker Taiwan dollar, down 1.3 percent this year, boosts the cost of imported goods and inflation.
The Taiwan dollar surged 0.6 percent on Friday, the most since June 30 last year. The currency rose 0.1 percent in the week to NT$32.931, Taipei Forex Inc said.
The outlook for global financial markets remains "unclear and unstable," Ahn Byung-chan, director-general of the Bank of Korea's international bureau, said on Friday.
The Morgan Stanley Capital International Asia-Pacific Index dollar-denominated index lost 8 percent this week, the most since September 1990. US Treasuries and Japanese government bonds rose as investors sought the safety of debt.
"There's a flight to quality," said Marcelo Ayes, senior treasury vice president at Rizal Commercial Banking Corp in Manila. "We are probably close to seeing the worst, but it's not over yet."
Sentinel Management Group Inc, a US cash management firm, this week blocked investors from making redemptions and Japan's Mitsubishi UFJ Financial Group Inc reported losses from the US subprime contagion. Hedge funds run by Bear Stearns Cos, Australia's Absolute Capital Group Ltd and BNP Paribas SA also suspended withdrawals in the last month.
The Singapore dollar was down 0.9 percent this week at S$1.5364, the worst loss since June last year. Markets were closed in Indonesia on Friday. The rupiah traded as low as 9,580.
The peso slipped 2.4 percent this week to 46.85, the most since October 2000.
Thailand's baht onshore weakened every day to 34.69, taking losses to 1.7 percent.
Central bank governor Tarisa Watanagase said on Thursday officials were monitoring the baht, adding Thailand had no immediate plan to lift capital controls on overseas investment that were imposed in December.