Sept. 26 (Bloomberg) -- Asian currencies fell, led by the Philippine peso, on concern investors will shun the region's assets as negotiations on a proposal to inject $700 billion into U.S. financial markets stalled.

All 10 of the most-traded Asian currencies declined after U.S. lawmakers splintered over a proposed rescue plan to alleviate the credit squeeze. Senate Banking Committee Chairman Christopher Dodd said an agreement he reached earlier in the day with some Republicans was later undermined by a proposal offered by House Republicans led by Representative Eric Cantor.

``We've got some impact from a sudden turn of sentiment that the U.S. Congress may not have actually made some progress as markets had initially thought,'' said Vishnu Varathan, a regional economist at Forecast Singapore Pte. ``The side of the coin that Asians will look at is the risk aversion bit and that doesn't bode well for the peso.''

The Philippine currency dropped 0.6 percent to 46.745 per dollar at the 4 p.m. close of trading in Manila, according to the Bankers Association of the Philippines.

Malaysia's ringgit fell for a fourth day on concern export growth will slow after U.S. government reports showed new home sales and orders for durable goods declined in August and jobless claims rose. Malaysia shipped 13 percent of its exports to the U.S. in the first seven months of the year, making it the second-biggest overseas market after Singapore.

`Shaky' Markets

``The chances of a recession have increased and that's affecting all the key export markets for Malaysia,'' said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. ``Markets are still on shaky and volatile ground.''

The ringgit dropped 0.2 percent to 3.4345 per dollar, according to data compiled by Bloomberg.

Taiwan's dollar declined for a third day after the central bank unexpectedly reduced interest rates yesterday for the first time since 2003, saying the global financial crisis has heightened the risk of an economic slowdown.

``In the near term, we could still see some weakness in the Taiwan dollar, mainly because risk aversion remains at very elevated levels,'' said Maya Pinto, an economist at IDEAglobal in Singapore. ``But in the medium to longer term, once the U.S. financial crisis blows over, among the regional currencies we'd expect the Taiwan dollar to outperform again.''

The island's currency fell 0.2 percent to NT$32.045 against the U.S. dollar, according to Taipei Forex Inc.

Korean Won Falls

South Korea's won completed a second weekly decline as U.S. lawmakers disagreed over the finance-industry rescue plan, sapping demand for emerging-market assets.

The currency extended this year's loss to 19.3 percent, Asia's worst performer, as overseas investors sold more local shares than they bought for a third day this week.

``Traders turned skittish as the U.S. bailout plan is not likely to be approved anytime soon,'' said Roh Sang Chil, a currency dealer at Kookmin Bank in Seoul. ``With stocks falling sharply, demand for the dollar strengthened further.''

The won declined 0.2 percent to 1,160.50 per dollar, according to Seoul Money Brokerage Services Ltd. The currency slid 1.8 percent this week, having touched a four-year low of 1,167 yesterday.

The Kospi index of local stocks slipped 1.7 percent, snapping a five-day gain.

Elsewhere, the Singapore dollar lost 0.4 percent to S$1.4281 against the U.S. currency, paring its gain this week to 0.6 percent. The Thai baht was little changed at 33.95, having advanced 0.7 percent this week, Indonesia's rupiah was little changed at 9,391 and Vietnam's dong rose 0.1 percent to 16,600.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

Last Updated: September 26, 2008 05:24 EDT