By Lilian Karunungan Feb. 6 (Bloomberg) -- Asian currencies dropped for a fourth week, the longest run of losses since June, as concern that some European nations will struggle to contain and finance budget deficits eroded demand for emerging-market assets. Malaysia’s ringgit and the Singapore dollar led declines as the MSCI Asia-Pacific Index of regional shares slumped to a 10- week low. The U.S. dollar rose to an eight-month high against the euro as the cost to protect Portugal and Greece’s debt from default reached a record. European Union Monetary Affairs Commissioner Joaquin Almunia said this week that the two nations’ external funding needs are “big.” “It’s a flight to quality with the sell-off in equities and risky assets,” said Sim Moh Siong, a currency strategist at Bank of Singapore, a private banking unit of Oversea-Chinese Banking Corp., Singapore’s third-largest bank by value. “It’s broadening out to developed and emerging markets and the longer the problem lingers, the greater the risk of contagion.” The ringgit dropped 1 percent this week to 3.4445 per dollar in Kuala Lumpur, and touched a four-month low of 3.4540 yesterday, according to data compiled by Bloomberg. The Singapore dollar lost 1.3 percent to S$1.4233, South Korea’s won slid 0.7 percent to 1,169.45 and the Indian rupee declined 1 percent to 46.6313. Fund Outflows Asian currencies extended losses this week as the deficit woes in Europe added to concern that China’s monetary tightening will curtail an economic recovery and interrupt a pickup in trade. The cost to guard against a default on European sovereign debt exceeded that of U.S. investment-grade companies for the first time, Bank of America-Merrill Lynch analysts wrote in a report on Feb. 4. The MSCI Asia-Pacific Index dropped 2.5 percent yesterday, capping a third weekly decline. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-actively traded local currencies against the greenback, slid 0.6 percent from Jan. 29. Emerging-market equity funds lost $1.6 billion in the week ended Feb. 3, the biggest outflow in 24 weeks, as earnings reports and Greece’s debt woes raised concern that the global recovery may falter, according to Cambridge, Massachusetts-based research company EPFR Global. ‘Payback Time’ The Korean won fell to a six-week low and Taiwan’s dollar traded near its worst level in five weeks as stocks tumbled worldwide. Overseas investors sold $1.3 billion more Taiwan shares than they bought this week and yesterday trimmed their holdings in Korea for the first time in four days. “This is basically payback time for the rescue of the global economy last year, which was through government over- spending,” said Dariusz Kowalczyk, chief investment strategist in Hong Kong at SJS Markets Ltd. “Because of exposure to exports and high foreign debt, the Korean won is vulnerable to what’s happening with European sovereign credit.” Elsewhere in Asia, Indonesia’s rupiah fell 0.8 percent this week to 9,420 per dollar and Thailand’s baht slid 0.1 percent to 33.23. The Philippine peso slipped 0.1 percent to 46.545 and China’s yuan was little changed at 6.8271. To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.

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