Asian currencies rallied on Thursday, with the Singapore dollar hitting a nine-year high and the Philippine peso touching a 4-1/2-year peak, in reaction to a broad sell-off in the US currency overnight.
Renewed strength in local currencies triggered a wave of comments from officials. South Korea warned against won strength and the Thai central bank said it may relax its capital controls further to help ease upward pressure on the baht.
Central bank intervention to curb currency strength was suspected in South Korea and India. Trade was generally subdued with US and Japanese markets closed for a holiday. But with the dollar taking a beating overnight as investors adjusted positions ahead of the break, Asia's currency markets held their firm tone.
"Over the last few weeks we have seen bouts of intervention on some currencies, while some central banks have said they are not concerned about currency strength," said Callum Henderson, head of currency strategy at Standard Chartered Bank.
"But the bias is for further Asian currency strength and we have had a major move in the dollar in the last 24 hours, albeit on thin liquidity."
The Philippine peso rose to 44.66 to the dollar, its highest level in about 4-1/2 years, while the Singapore dollar extended Wednesday's gains to a new nine-year high of about 1.5520 per US dollar.
The Chinese yuan rose to 7.8575 per dollar, the strongest since its July 2005 revaluation, while the Japanese yen was at 116.58 per dollar, up about 0.75 percent from late Wednesday's levels in Asia.
The South Korean won added as much as 0.5 percent to about 929.20 per dollar - its highest in just over 1-1/2 weeks. It was supported by a South Korean central bank decision on Thursday to raise reserve requirements on short-term deposits. The chief foreign excher necessary to stabilise the currency market, adding the won had overshot fair value.
"It is more a case of the authorities wanting not only just to stem won strength because of concerns about exporters but also because it is starting to detect that speculative flows are behind won gains," said Bank of America currency strategist Christy Tan.
The won by some measures was still at record highs, raising concerns about export competitiveness, Tan said. The won gapped higher at Thursday's opening - a sign of market strength, according to technical analysts. In Singapore, dealers said they did not suspect the central bank of intervening to cap gains in the Singapore dollar despite market wariness in early trade about such action.
A trader in Manila said it also appeared that the Philippine central bank had stayed away from the market as weakness in local stocks helped limit the peso's rally. "I don't think they (the central bank) have been in the market," he said. "One reason for the peso high is the major US dollar sell-off overnight, but there is some weakness in the stock market, so the factors are balancing out."
Elsewhere, Miranda Goeltom, Bank Indonesia's senior deputy governor, said the current exchange rate of the Indonesian rupiah was still conducive for the country's exports and imports.