Asian currencies held their stronger tone on Thursday, pushing ahead without waiting for the Japanese yen's lead, though wariness of going too far and provoking a central bank response persisted.
Trade calmed down after a hectic session on Wednesday when the yen raced to four-year highs. Even as the yen pulled back from its peak of 103.40 per dollar the regionals still posted gains on Thursday, led by the north Asians.
The Korean won firmed to its strongest level since November 2000 and the Taiwan dollar was at its highest since July 2002.
Although both economies have their political worries - the Korean President was impeached last month and the opposition in Taiwan is contesting the outcome of the March 20 presidential election - there are signs domestic growth is strengthening.
Further, rising inflation may become a policy concern. South Korea's CPI rose 1.0 percent in March from February, and core inflation was 2.7 percent higher than 12 months earlier.
"With a target of 3.5 percent for core CPI, the Bank of Korea is likely to increasingly favour won appreciation as a form of monetary tightening instead of higher interest rates," Goldman Sachs analysts said in a market report.
"This, of course, is helped by the rise in the yen as it diminishes the risk of competitive losses from a stronger won."
Still, that did not mean that Asian central banks had abandoned their interventionist tendencies, which have seen the region accumulate over $2 trillion in foreign exchange reserves.
Simon Flint, Bank of America's senior strategist for Asia, said central banks were upbeat but not wildly optimistic about the growth outlook.
"Therefore they are highly unlikely to allow very significant appreciation of their currencies for the time being," he said.
The Thai baht rallied to a five-week high near 39.2 per dollar. The baht, which has been in a downtrend since early February, has rallied about one percent in the last two days.
Analysts said it had been oversold and had the potential to strengthen back towards the February high of 38.8 per dollar.
"Overall I think the Asians still look very bullish," said one trader, pointing to strong first-quarter data. The Singapore dollar rose as far as 1.6724 per dollar, a six-week high, before losing steam on concern its gains may be testing the tolerance of the Monetary Authority of Singapore.
The MAS, which holds a policy review this month, manages the trade-weighted exchange rate in an undisclosed band. Analysts and traders estimate the Singapore dollar may be near the top end of that band, so the market may restrain itself.
Despite expected solid growth, analysts do not see much scope for the MAS to tighten policy, which would allow for a stronger exchange rate, given tame inflation and a high unemployment rate, but the market has priced in some risk of a change.
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