Asian currencies rose on Friday, bouncing back from this week's multi-month lows thanks to a broad rebound in equities, upbeat US economic data and a rise in the yuan to a post-revaluation high against the dollar.
Dealers said remarks on inflation from Federal Reserve Chairman Ben Bernanke on Thursday appeared less hawkish than comments made a week ago, helping trigger stock market gains.
Bernanke said the Fed's inflation-fighting credibility had limited the degree to which lofty energy costs have bled into other prices paid by American consumers.
Data on Thursday showing solid US regional manufacturing activity also eased concerns about a slowdown in growth, helping boost sentiment in fragile currency markets.
"What we're seeing is anxiety about the US is diminishing for now and the Asian currencies should strengthen," said Tim Condon, head of research at ING in Singapore.
The South Korean won rose as much as 0.6 percent to 953.9 per dollar as local shares notched up their biggest one-day percentage gain in more than 1-1/2 years.
The Taiwan dollar, which hit a 5-month low at about 32.75 per dollar on Wednesday, hit a one-week peak at 32.40, while the Singapore dollar rose as high as 1.5862 - rebounding almost one percent from a low of 1.5999 per dollar hit this week.
The Philippine peso also touched a one-week high at 52.98 per dollar.
"We are going into a consolidation phase and a dollar-selling trend is unlikely to start so soon as the market continues to focus on inflation and imbalances in the global economy," said Philip Wee, a currency strategist at DBS Bank in Singapore.
The rally in Asian currencies was aided by the yuan, which hit 7.9970 per dollar - the highest level since its revaluation in July last year. Dealers say a pick up in yuan gains this week suggests China is using the exchange rate in its battle to slow the economy.
The Indonesian rupiah firmed as much as 1 percent to 9,289 per dollar, the highest level in more than a week and comfortably stronger than Wednesday's 5-month low at 9,560.
Dealers said there had been no signs of central bank intervention to boost the rupiah after Bank Indonesia governor Burhanuddin Abdullah said on Thursday the central bank was "in the market" to help the currency. A trader said there had been signals from foreign banks of renewed investor interest in Indonesian assets such as bonds. "The yields are just too attractive," he said.
The yield on 8-year government bonds soared to 13 percent at an auction on Tuesday, compared with 11.95 percent at a similar sale in April. Indonesian bond yields are among Asia's highest. The Malaysian ringgit rose to its strongest in more than a week at 3.6361 per dollar, up more than 1.5 percent from this week's 2-1/2 month trough at 3.6945.
Sharp moves in the ringgit this week suggest the central bank is further easing its tight grip on the currency, traders said. "The central bank has pretty much accepted the ringgit is going to be more volatile if you open it up, especially at this juncture when overseas markets and all assets types are seeing higher volatility," said a dealer in Kuala Lumpur.
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