South Korea’s won and Malaysia’s ringgit led a decline in Asian currencies as Europe’s sovereign- debt crisis engulfed Italy, the region’s biggest borrower, sapping demand for emerging-market assets. The won fell by the most in seven weeks and the ringgit retreated to its lowest level in almost two weeks after warnings by Moody’s Investors Service and Standard & Poor’s over Italy’s ability to finance its debt. Overseas investors cut their holdings of Korean stocks for the first time this month. “It’s a wholesale flight to safety now,” said Tim Condon, Singapore-based head of research for Asia at ING Groep NV. “Risk assets are going to be sold off today. It’s going to be a bad day for Asian equities, unless something changes. It’s going to be a bad day for Asian currencies as well.” The won depreciated 0.8 percent to 1,066.65 per dollar as of 11:27 a.m. in Seoul, according to data compiled by Bloomberg. The ringgit weakened 0.7 percent to 3.0335 and China’s yuan declined 0.08 percent to 6.4723. Euro-area countries may have to double their bailout fund to 1.5 trillion euros ($2.1 trillion) to provide support for Italy, the European Central Bank said, according to German newspaper Die Welt. The Financial Times cited unnamed senior officials as saying that European leaders are prepared to accept that Greece should default on some of its bonds. Factory Slowdown “It looks like the European debt crisis will spread more, on top of the Greece crisis, which hasn’t been resolved yet,” said Byeon Ji Young, a currency analyst at Woori Futures Co. in Seoul. “Concern about the Europe debt crisis is making investors flee emerging markets to seek safer assets.” The ringgit declined for a second day after a government report yesterday showed industrial output in Malaysia slid 5.1 percent from a year earlier in May following a 2.2 percent drop the previous month. That was steeper than the median estimate for 2.7 percent in a Bloomberg poll of 15 economists. The People’s Bank of China set the yuan’s reference rate weaker for a second day, fixing it at 6.4748 per dollar. China’s State Council may discuss the nation’s economic development direction for the second half during a regular meeting tomorrow, the National Business Daily reported today, without saying where it got the information. China’s economy probably grew the least in almost two years last quarter. The government is forecast to report tomorrow that gross domestic product rose 9.3 percent from a year before, according to the median estimate in a Bloomberg survey, down from 9.7 percent the previous quarter. China Slowdown Thailand’s baht fell 0.1 percent to 30.36 against the dollar, taking this week’s decline to 0.5 percent, according to data compiled by Bloomberg. “Sentiment for the emerging-market markets is weak due to growing concerns over Europe’s debt problems,” said Hideki Hayashi, a global economist at Mizuho Securities Co. in Tokyo. “China’s slowdown will add to weight on the regional currencies. The baht is influenced mostly by external factors.” Indian rupee 12-month non-deliverable forwards weakened 0.1 percent to 46.63 per dollar ahead of today’s release by the Central Statistical Organization of the industrial production data for May. The median estimate in a survey of 25 economists by Bloomberg News shows output at factories, utilities and mines rose 8.7 percent from a year earlier, compared with the 6.3 percent gain in April. Elsewhere, Indonesia’s rupiah decreased 0.1 percent to 8,542 against the greenback. Singapore’s dollar fell 0.3 percent to S$1.227, Taiwan’s dollar slid 0.4 percent to NT$28.918 and the Philippine peso dropped 0.3 percent to 43.075. To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net Chienmi Wong in Singapore at 2658cwong303@bloomberg.net To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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