Growing bearishness on the US dollar and speculation on a Chinese yuan revaluation boosted the Korean won to its highest level in more than 4 years and the Singapore dollar to near 5-year highs on Monday. The won rose to 1,105.1 per dollar, its highest since September 2000 and a gain of over half a percent from Asian trading levels on Friday.
The Singapore dollar climbed as far as 1.6513, a level lasts seen in January 2000.
The gains were driven by strength in the yen as the market overlooked Friday's robust US jobs report and focused on the mounting US current account and budget deficits. That pushed the dollar to 6-1/2 month lows against the Japanese currency and record lows versus the euro.
Analysts said the Asian rally was spurred by heightened speculation that China would revalue the yuan and the view that regional policy makers might favour stronger currencies.
"The risk is probably on the downside for the dollar/Asians," Jimmy Koh, head of research at United Overseas Bank said. "It looks like China will move sooner than later. The thinking is one-way."
The Taiwan dollar moved to 32.87, its highest level since April and the Indonesian rupiah shrugged off domestic political anxiety to reach a September peak past 9,000 per dollar.
The Thai baht was at 40.79, its highest in over three months, and analysts said the regional laggard would rally as investors overcame worries about recent violence in Thailand's south.
"Asian policy makers have subtly shifted their focus from growth to inflation, which is why rates are rising across the region - China, Taiwan, Thailand and India - and/or currencies are rising, notably the won and Sing dollar," Lehman Brothers wrote in a note.
"Markets are right not to lose sight of the importance of growth for Asian currencies. But the reality is that inflation trends are more critical to policy and Asian currencies at the moment."
Meanwhile, yuan non-deliverable forwards continued to price in a higher premium on the Chinese currency. One-year NDFs were quoted at 3,800 points, pricing in a yuan appreciation of nearly 5 percent.
Yuan speculation has intensified following China's surprise decision to raise interest rates last month and Chinese officials' remarks that fundamental preparations have been made for exchange rate reform.
Media reports have fuelled bets on a yuan revaluation, although Chinese state media quoted a central banker on Monday as saying China would maintain a stable monetary and yuan policy while it tried to keep inflation in check.
The yuan has been managed in a tight band against the US dollar for almost a decade and has spent the last seven years effectively pegged at around 8.28 per dollar.
Forwards on the Hong Kong dollar peg moved to what analysts said was a record premium on the Hong Kong dollar, at 1,500 points for a year.