The Singapore dollar rose past the 1.6800 per US dollar barrier on Tuesday to hit a new four-year high, while the Taiwan dollar and South Korean won made strong headway despite talk of central bank intervention.
Dealers said mainly foreign investment banks and funds appeared to be testing the resolve of Asian central banks after the Group of Seven industrial powers implicitly called on Asian countries to let their currencies appreciate against the dollar.
The Singapore dollar rose more than half a percent from late Monday to 1.6749 per dollar, a level not seen since January 2000.
Dealers said local banks that had been buying US dollars in the morning, fuelling suspicion the central bank was resisting the Sing dollar's rise, unexpectedly stepped out of the market.
As foreign funds pushed the Sing dollar through the 1.68 level to trigger stop-loss US dollar sell orders, the very same local banks started selling US dollars, they said.
One dealer said the sharp rise sparked talk that the central bank had allowed a breach of the undisclosed policy band within which it targets the Sing dollar to preserve its competitiveness against the currencies of major trading partners.
However, others disagreed that the band had been breached and said in fact it seemed authorities had allowed the Sing dollar to catch up with gains in the Taiwan dollar and South Korean won.
Year-to-date gains in the Sing dollar stand at 1.35 percent, versus 2.44 percent and 2.63 percent in the Taiwan dollar and South Korean won respectively.
"We are on the stronger side of the band but no we haven't breached it," said Claudio Piron, head of strategy at Standard Chartered Bank in Singapore.
He said the magnitude of gains so far this year showed a softening of the weak currency bias among Asian central banks.
"There are indications that the central banks had been in the market today. The volumes are also high. So it seems like they were there to absorb the flow and not change levels or direction," he said.
The South Korean won rose more than a quarter percent to touch a four-month high of 1,161.7 per dollar, before talk of central bank intervention capped the rise. The won had briefly traded at 1,161.0 in offshore trade early last week.
The Taiwan dollar rose to 33.16 per US dollar, its highest since July 2002, even as the central bank continued to place bids for US dollars.
In contrast most major European currencies, the Australian dollar and the Canadian dollar have risen to multi-year highs. The euro has risen some 10 percent against the dollar since September.
Chinese yuan non-deliverable forwards traded at a premium of 900 points on the three-month tenor versus 1,000 points on Monday.
The premium on the one-year tenor was around 4,000 points from Monday's 4,200.
The Thai baht held within a familiar range around the 39 per dollar level, after hitting a three-week high of 38.95 in offshore trade.
The Philippine peso ended local trade slightly higher from Monday as official campaigning for the presidential elections in May kicked off. The Indonesian rupiah rose to around 8,400 per dollar.