Five Asian currencies hit their highest level in years on Wednesday as the US dollar fell after minutes from the Federal Reserve's March meeting suggested US interest rates were close to a peak.
The US dollar fell to a seven-month low against the euro and a two-week low against the yen, its decline hastened by softness in US housing and producer price data.
That pushed the South Korean won to its highest in 8-1/2 years at about 944 per dollar. The Singapore dollar extended its rise to its strongest in nearly eight years, hitting 1.5971 per US dollar.
The Thai baht rose to a six-year high in offshore trade. The local market was closed as Thais voted for a new Senate.
The Indonesian rupiah added about a third of a percent to 8,950 per dollar, its strongest since November 2004, while the Malaysian ringgit strengthened to about 3.6643 per dollar - the highest level in almost eight years.
"There is a persistent trend that we are seeing in Asian currencies and it has got to do with more than a view on Fed policy," said J.P. Morgan currency strategist Claudio Piron.
"The global economy is doing well despite higher oil prices, there are strong equity inflows into the region and there is also the China factor in the background."
Some traders think Asian currencies have more room to rise on the possibility that China will let the yuan appreciate faster in response to growing trade imbalances. Chinese President Hu Jintao is visiting Washington this week and will meet US President George W. Bush on Thursday.
But a Group of Seven meeting this weekend and surging oil prices were also on the market's mind.
"High oil prices could pose a risk to AsiaN FX if little comes out from the US visit by Chinese President Hu Jintao and the G7 meetings," ABN Amro Bank's currency strategist Shahab Jalinoos said in a note.
Crude oil hit a record high on Tuesday and was trading around $71 per barrel on Wednesday.
A Singapore-based trader said the market was also wary about getting too bullish on Asian currencies because central banks in Thailand and South Korea were suspected of intervening this week.
South Korean Finance Minister Han Duck-soo said on Wednesday that the government and Bank of Korea has been watching the currency market closely and taking appropriate measures when necessary.
Philip Wee, DBS Bank's currency strategist, said the Bank of Korea could intervene to sell the won since Korean policy makers felt it was overvalued.
"But US dollar/Taiwan dollar fair value should be closer to 32 on the strength of its reference currencies - euro, yen and yuan - and towards 31.20 if you factor in the Taiwan stock market," he said.
The Taiwan dollar rose as far as 32.35 per US dollar, up about 0.4 percent from Tuesday's domestic close.