The Singapore dollar hit a record high and the Indonesian rupiah touched a seven-year peak on Monday as investors chased higher-yielding Asian currencies on the expectation that emerging Asian countries will keep tightening to contain inflation. Some of the region's central banks such as the Monetary Authority of Singapore (MAS) and Bank Indonesia were spotted buying dollars to check strength in their currencies, but they pulled back their intervention levels again, dealers said.
The emerging Asian currencies may experience some correction in the short term if there is a rebound in the yen, with support around 85.50 against the dollar. Any rebound in the yen might cause liquidation of carry trades, but should not hurt the underlying trend, they added. The Singapore dollar strengthened to as firm as 1.2550 versus the greenback in early trade. Initially, the MAS was spotted buying dollars around 1.2560 but lowered the bids to 1.2555 and 1.2550 gradually to check strength in the city-state currency, dealers said.
The Indonesian currency firmed to as high as 8,635 per dollar, the strongest since April 2004. The Taiwan dollar strengthened to as firm as 28.874 vs the greenback, the strongest since February 10. The peso eased on dollar-demand linked to fixing and the central bank was spotted buying dollars around 43.00 per dollar.