The won climbed to as high as 1,103.90 per dollar in local trade as the surprising absence of intervention by Korean authorities caused macro funds and other investors to bail out of short won positions, accelerating the upward move.

The won's rise stood out on the day, with many other emerging Asian currencies relatively steady. Yet with regional equity markets reflecting strength from foreign inflows, other currencies may follow the won higher.

"The Nikkei rebound has had a very positive effect and enticed portfolio flows into the region given short-term buying opportunities," said Sacha Tihanyi, a senior currency strategist at Scotia Capital in Hong Kong, referring to a bounce in Japanese stocks after heavy selling in the days following the country's massive March 11 earthquake and tsunami.

"Our core view is that the Asian currency group on a whole should be set to gain against the USD in Q2 (but not as much against EUR), given the macro-financial fundamentals still working against the USD... mainly related to the policy front."

Tihanyi preferred the won and the Thai baht, saying central banks in those countries have suggested they would not hesitate in tightening policy further to curb inflation.

Foreign investors have been net buyers of South Korean stocks for 11 consecutive sessions -- the longest since October 2010 -- and have scooped up Indian shares for the past five days, despite Japan's nuclear crisis and unrest in the Middle East.

The continuous demand for South Korean shares helped the won recover all losses since the Japan quake and even swing into black. The currency has gained 1.8 percent against the dollar since March 11.

Credit Agricole Coporate and Investment Bank said it expects the won to rise further on improved risk appetite and demand for the country's stocks.

Asian currencies weathered comments from Dallas Fed President Richard Fisher that he would vote against any further monetary easing by the central bank after the current program is finished in June.

Possible tightening by the Fed would not drag on Asian currencies much as the regional central banks are seen raising rates further to fight inflation, analysts said.

"If central banks ate ahead of the curve in lifting interest rates ahead of inflation expectations, then monetary policy will be supportive of Asian currencies," Commerzbank said in a research note.

WON

The won ended local trade at 1,104.2, the strongest close since late April 2010. It is on track to be the third-best performing emerging Asian currency in the first quarter, up 2.8 percent.

After the local closed, it strengthened further to 1,101.6, the firmest level in offshore trade since Feb 9.

A lack of intervention boosted views that South Korea's foreign exchange authorities may allow more appreciation in the won to fight inflation.

Earlier, the finance minister reaffirmed that the government was not pursuing a policy of keeping the won undervalued to exporters but admitted the won's rise was slower than some investors had expected.

Still, some traders were wary of won-selling intervention. Authorities were spotted buying dollars on Feb. 9, when the won hit 1,102, the strongest since Sept. 2008.

Since then importers have been actively buying dollars for settlements on any dips in dollar/won.

RUPIAH

Indonesia's central bank was again spotted checking the rupiah's gains, dealers said, though upward pressure on the rupiah from offshore players may end up dragging the pair toward 8,705 in the medium term.

"It is stuck because the central bank keeps intervening to support USD/IDR, so it doesn't break the 8,705 level. But flows are coming, betting on the IDR's further strength due to inflows from commodities exports and lower inflation figures for March," said a Jakarta-based dealer.

The rupiah, which had suffered from worries about inflation earlier this year, has lately been a comeback story. It was poised to be the best performer in the first quarter, having risen 3.4 percent against the dollar.

Investors have chased the Indonesian currency on expectations that the central bank will allow its appreciation to curb rising.

BAHT

Standard Chartered recommended using the baht as a funding currency to buy other emerging Asian currencies such as the ringgit and rupiah.

Standard Chartered said the Thai currency is expected to continue to underperform because of deteriorating external balances and political uncertainty in coming months.

"Leveraged funds should look to use the THB as a funding currency for long positions in other Asia ex-Japan (AXJ) currencies, such as the Indonesian rupiah (IDR) and Malaysian ringgit (MYR), which have a positive exposure to high commodity prices," the bank said in a note.

The baht is particularly attractive as a funding currency for leveraged funds as it has very low volatility, it added.

The baht has lost 0.53 percent so far this year, becoming the worst performing currency among emerging Asian units.