TOKYO: Several Asian currencies soared against the dollar Tuesday as a rally by regional shares rekindled risk appetite and interest in the units, dealers said.
The Taiwan dollar and Malaysian ringgit struck highs not seen since the Asian financial crisis in 1997, while South Korea's won was at its strongest for two-and-a-half years.
The rallies among regional units came as analysts said they expect central banks this year to adopt a strategy of keeping their currencies strong and interest rates high in order to tame inflation, a growing problem in Asia.
"The final tool in the armory of the region's authorities is FX appreciation," Fiona Lake, a Goldman Sachs analyst, wrote in a research note.
"Korea, Indonesia and Taiwan have shown greater desire for currency appreciation to help tackle inflation," Dow Jones Newswires quoted Lake as saying.
Emerging Asian markets have seen huge inflows of foreign money as their economies came through the global downturn quicker than Western countries, but this has led to rising inflation concerns and interest rate hikes.
Indonesia, China, India, Malaysia, South Korea and Thailand have all increased their lending rates and have also introduced other measures to cut down on the inflows and keep price rises from getting out of hand.
In afternoon Asian trade, the dollar fell to 1,104.32 Korean won from 1,107.35, to Tw$28.91 from Tw$28.98 and to 8,915.50 Indonesian rupiah from 8,975.25.
The greenback also turned down against the euro as players bought back the common European currency on bargain hunting after it fell on the back of weaker-than-expected German economic data, dealers said.
The euro bought $1.3622, up from $1.3581 in New York late Monday. Against the Japanese unit, the common currency rose to 112.07 from 111.78.
The dollar edged down to 82.26 yen from 82.32 yen.
The euro fell on Monday after data showed German industrial orders tumbled 3.4 percent in December, much worse than forecasts for a drop of 1.5 percent.
"Profit taking (on the euro) emerged after the German data overseas, which then triggered short covering in Tokyo," said Yusuke Fujishima, dealer at Mitsubishi UFJ Trust and Banking.
Besides the technical buy-backs, two dealers cited rumours that Asian central banks were buying the euro.
One dealer said he had heard the banks were converting their dollars from intervention operations to limit gains in their currencies, according to Dow Jones Newswires.
However, the dollar was being supported by higher yields on US Treasury bonds amid expectations for a recovery in the world's largest economy, dealers said.
Investors were also reassessing the prospect of rate hikes in the eurozone, which had boosted the single currency in recent weeks.
"For US bond yields to gain further, better US economic indicators and more hawkish Fed comments are needed," Satoshi Tate, senior dealer at Mizuho Corporate Bank, told Dow Jones Newswires.
He added that investors would likely pay attention to speeches later Tuesday by the Federal Reserve presidents of Atlanta, Dallas and Richmond.
Against other Asian currencies the dollar fell to Sg$1.2724 from 1.2751 on Monday and to 30.70 Thai baht from 30.82, while it also dropped to 43.45 Philippine pesos from 43.67.
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