By Bob Chen Jan. 23 (Bloomberg) -- Asian currencies fell this week, led by South Korea’s won and the Indonesian rupiah, on speculation China will take more steps to curb inflation after economic growth accelerated to a three-year high. The Bloomberg-JPMorgan Asia Dollar Index declined 0.7 percent this week, the biggest drop in eight months, on concern monetary tightening in China will damp a recovery in global trade. A proposal by President Barack Obama to reduce risk- taking by U.S. financial institutions cooled demand for emerging-market assets, dragging regional stocks lower. “The China bubble risk is a big source of fear for financial markets, particularly investors in risky assets around the world,” said Tim Condon, head of Asia research at ING Groep NV in Singapore. “Lower stocks in the U.S. are going to mean knee-jerk selling in Asia and that is going to show up in a higher dollar against Asia ex-Japan currencies.” South Korea’s won fell 2.4 percent over the last five days to 1,150.85 per dollar in Seoul, according to data compiled by Bloomberg. Indonesia’s rupiah declined 1.7 percent to 9,359 and Malaysia’s ringgit slid 1.7 percent to 3.3997. China is stepping up measures to slow record lending and inflation in the world’s fastest-growing major economy. The central bank has guided short-term bill yields higher and raised the amount of funds banks must set aside as reserves this month to drain funds from the financial system. China Tightening Gross domestic product on the mainland increased 10.7 percent in the fourth quarter, the biggest gain since 2007, the National Bureau of Statistics said in Beijing on Jan. 21. Economic growth accelerated from a revised 9.1 percent in the prior three months. Inflation quickened to 1.9 percent in December, the most since November 2008, a separate report showed. “China might raise interest rates,” said Janet Lin, a currency trader in Taipei at Taiwan Business Bank. “The global market is worried about that.” Policy makers will likely act sooner than previously anticipated to contain prices, a Bloomberg News survey of economists showed after the data release. China will raise interest rates by the end of June and also ratchet up banks’ reserve requirements, according to the median of 17 forecasts. Stocks slumped on Obama’s plan to curb banks’ trades that aren’t done for the benefit of customers. The Standard & Poor’s 500 Index of U.S. shares dropped 3.9 percent this week, the biggest decline since October, while the MSCI Asia-Pacific Index fell 3.5 percent, the most in seven months. Obama Proposals Obama’s proposals, which will be added to an overhaul of regulations being considered by Congress, would also prohibit banks from investing in hedge funds and private equity funds. “Currency markets in Asia are tumbling on risk aversion caused by news of Obama’s plans to curb banks’ trading,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “Obama is getting more populist and his move may signal more anti-business policies ahead, which could drag on economic growth and business’s profits.” The ringgit posted the biggest weekly drop since February 2009, and the rupiah had its steepest decline in seven months. China’s 12-month yuan forwards fell 0.4 percent to 6.6315 per dollar, reflecting traders’ bets for a 2.9 percent gain in the currency in a year. The contracts were signaling 3.3 percent appreciation a week earlier. Rate Decisions Bank Negara Malaysia will maintain its overnight interest rate at a record-low 2 percent on Jan. 26 to help pull the economy out of a recession, according to all 13 economists in a Bloomberg News survey. Policy makers in the Philippines and India also meet next week to decide on borrowing costs. South Korea and the Philippines are due to report gross domestic product numbers for the fourth quarter. Elsewhere in Asian currency trading, Thailand’s baht weakened 0.4 percent this week to 32.99, the Taiwan dollar dropped 0.5 percent to NT$31.980 and the Philippine peso declined 0.8 percent to 46.19. China’s yuan was little changed at 6.8269 in the spot market. To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net

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