The Singapore dollar pared some of its gains on Monday but stayed within half a cent of the morning's four-year peak after the Monetary Authority of Singapore surprised markets with a tightening of policy.
The rest of Asia also got a boost from the move which analysts said raised expectations other currencies would be allowed to strengthen.
The Singapore dollar traded as high as $1.6650 per dollar, its strongest since January 2000, before traders said there were some signs the MAS had intervened to remind the market it wanted a "modest and gradual appreciation".
At its strongest, the Singapore dollar was up about 0.65 percent from Thursday, before easing back towards 1.67 per dollar. Markets in Singapore were closed on Friday for a holiday.
The Taiwan dollar and Korean won followed in the Sing's direction, rising initially and then declining. The won stayed on the weaker side of 1,140, unwilling to test last week's 3-1/2 year high near 1,139.
The Thai baht stayed somewhat weak but the Indonesian rupiah made gains in later deals.
Peter Redward, strategist with Deutsche Bank, said he expected the Singapore dollar to consolidate before it pushed ahead.
"With the mid-point of the Sing NEER strengthening and with our expectation that the US dollar will continue to decline particularly against Asia, it seems dollar/Sing will continue to come off over the next few months," he said.
The exchange rate is the focus of monetary policy in Singapore. The MAS manages the dollar in an undisclosed band around a nominal effective exchange rate (NEER) value.
Citing a favourable growth outlook and the risk of rising inflationary pressure, the MAS said it was tightening policy to allow a modest and gradual appreciation of the trade-weighted Singapore dollar, ensuring a busy morning for traders returning from the Easter break.
"We've seen India tighten monetary policy moderately through the currency, Japan has been progressively tightening policy through the currency and now Singapore has," Redward said.
The normally steady Indian rupee has risen nearly four percent in less than a month while the yen is up some six percent since early March.
The most likely regional candidates to tighten policy next were Thailand and South Korea, Redward said. And they too would do it by letting their currencies appreciate, he said.
"That would make the most sense in the current environment."
"I was surprised. I do think that this is much earlier than would have been anticipated," UBS currency strategist Bhanu Baweja said of Singapore's tightening.
"It seems to me that at this point domestic demand growth is not all that strongly entrenched in the economy, and I think that on the external sector there still are some risks," he said.
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