Nov. 2 (Bloomberg) -- Malaysia’s ringgit led declines among Asian currencies on speculation the bankruptcy of U.S. commercial lender CIT Group Inc. will prompt investors to shun riskier assets.

The ringgit approached a three-week low and, with the exception of China, stock benchmarks tumbled across the region’s developing economies as concern a global financial crisis will worsen boosted the attraction of holding U.S. dollars. Banks, insurers and securities firms worldwide have reported credit losses of more than $1.6 trillion since mid-2007.

“What the CIT news will do is increase short-covering and support the dollar against most Asian currencies,” said Azmi Shukri Rahman, a foreign-exchange trader at CIMB Investment Bank Bhd. in Kuala Lumpur. “If you are looking for local CIT victims, there’s probably none or few. Investors will be cautious on risk-taking.”

The ringgit weakened 0.5 percent to 3.432 per dollar as of 4:25 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.4475 on Oct. 29, the weakest level since Oct. 6. Taiwan’s dollar declined 0.1 percent to NT$32.553. South Korea’s won traded at 1,182.5 from 1,182.05 on Oct. 30, after earlier dropping as much as 1.1 percent.

CIT yesterday filed for bankruptcy, listing $71 billion of assets and $64.9 billion in debt. A government report showing consumer spending in the U.S., the world’s biggest economy, dropped 0.5 percent in September from the previous month also cooled demand for riskier assets and dimmed the outlook for Asian exports.

Export Slump

Malaysia’s overseas shipments dropped 21 percent in September from a year earlier, following a 19.8 percent decline in August, according to the median forecast of 11 economists surveyed by Bloomberg News before data is released Nov. 4. South Korea yesterday announced a smaller decline in overseas sales for October than economists predicted as rising shipments to China countered a slump in U.S. demand.

“There’s a bit of risk aversion in the market,” said Gerrard Katz, head of currency trading at Standard Chartered Plc in Hong Kong. “The data points to an increased divergence between Asia and the U.S., but in times of stock market correction and risk aversion the market still tends to buy dollars.”

South Korea’s exports declined 8.3 percent from a year earlier to $34 billion, the Ministry of Knowledge Economy said. Sales to China, the biggest buyer of Korean goods, rose 3.4 percent in the first 20 days of October, while those to the U.S. slid 37 percent.

“The data from China and Korea suggest that in those places the growth remains very strong,” said Tim Condon, chief Asian economist at ING Groep NV in Singapore. “That kind of evidence will mount and people will forget about the sustainability fears for the U.S. for a while.”

Foreign Selling

The Taiwan dollar earlier fell to a seven-week low of NT$32.685 versus the greenback as overseas investors cut their holdings of the island’s shares by NT$7.79 billion ($239.4 million) today. Last week, foreign funds sold more than $1 billion of local equities, trimming net purchases for the year to $11.5 billion.

The Taiex stock index dropped as much as 1.7 percent, and the MSCI Asia-Pacific index of regional stocks slumped 1.2 percent.

Elsewhere, the Thai baht traded at 33.44 per U.S. dollar from 33.43 at the end of last week. Indonesia’s rupiah rose 0.2 percent to 9,570 and the Singapore dollar fell 0.1 percent to S$1.3978. China’s yuan was little changed at 6.828. Financial markets in the Philippines and India are shut today for holidays.

--Judy Chen, David Yong. With assistance from Yu-huay Sun in Taipei and Bob Chen in Hong Kong. Editors: James Regan, Shanthy Nambiar

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at +86-21-6104-7047 or Xchen45@bloomberg.net; David Yong in Singapore at +65-6212-1169 or dyong@bloomberg.net.

Last Updated: November 2, 2009 03:54 EST