Asian currencies shed all pretence at bearing up in the face of adversity on Tuesday as Standard & Poor's (S&P) added its no-confidence vote to a slew of ratings downgrades by Moody's Investors Service.

The S&p Move to cut South Korea's long- and short-term foreign currency ratings, reducing the country's debt to junk bond status, had the most far-reaching impact as it was more severe in scale than the Moody's downgrade on Monday.

The won dived to a record low of 1,990 against the dollar within the first hour of trade, down almost 14 per cent from its Monday close at 1,715. Seoul stocks also took a beating with the composite index losing 7.50 per cent to end at 366.36.

A senior central bank official's assurance that Korea did not face the possibility of sovereign default, given its usable foreign reserves and expected fund inflows, helped the won recover some composure and it closed at 1,962.

Lee Kang-nam, assistant governor of the Bank of Korea, also said the dollar supply had begun to improve after some Japanese banks rolled over loans to Korean banks on Monday.

But dealers still expected a brush with the 2,000 level."The S&P news is really poison in the market. It's only a matter of time for the dollar to reach 2,000 today," a foreign bank dealer in Seoul said.Comments by president-elect Kim Dae-Jung, quoted in a local newspaper, did little to soothe investors' fraught nerves.

The Chosun Ilbo quoted Kim as saying he was "flabbergasted" by Korea's financial situation and that Seoul's foreign reserves could hardly last one more day.

The won's precipitous fall knocked the wind out of the Taiwan dollar, pushing it to an early low of T$32.93 to the US dollar, as players sold it on a belief that it needed to weaken in line with its export rival.But the central bank's aggressive intervention minutes before the market closed propped it back up to close at T$32.52 against a previous T$32.603 finish.

The Hong Kong dollar recovered from an eight-week low of 7.7498/7.7504 to the US dollar, but dealers said the 7.75 support level could be vulnerable against a backdrop of credit rating downgrades in Asia.

US dollar offers by a major commercial bank sparked speculation that it was acting on behalf of the Hong Kong Monetary Authority, but this could not be confirmed. In South-east Asia, the ringgit was dealt a fresh blow as S&P also downgraded Malaysia's long-term foreign and local currency ratings and said it saw the outlook remaining negative.

The move, on the back of the Moody's downgrades on Monday, pushed the ringgit down to 3.8800/900 to the dollar from 3.8400/500 late on Monday.Dealers said the drop was worsened by poor year-end liquidity, but offshore dollar sales were expected to kick in around the 3.90 ringgit level.Malaysian finance minister Anwar Ibrahim said the ratings downgrades were a temporary development and recently announced austerity measures were adequate to tackle an economic crisis.

"I think the measures are adequate. I mean the belt-tightening is really tight and I think it is difficult to see that we do much more than this," he said.The Singapore dollar shed its early firm tone and slid back through the 1.67 level to the US dollar on spillover selling from the won's fall.

Lingering demand for US dollars from companies seeking to hedge their positions was capping the Singapore dollar's gains, dealers said. The Philippine peso headed south from the start, breaching its first volatility band and then falling to a low of 41.30 to the dollar, as companies found themselves cut off from a ready supply of dollars.

Manila traders said the central bank's half-hearted intervention to sell dollars at 39.95 pesos had little impact as players fretted about the central bank and commercial banks' suspension of a dollar pool scheme on Tuesday.The scheme, supposed to pump dollars into the market, proved inadequate in covering the needs of oil companies and big importers.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.