Emerging Asian currencies are expected to stay firm as investors are looking for shares in countries with good economic fundamentals at a time of global economic recovery and ample liquidity, analysts said.
Regional foreign-exchange authorities may check strength in their currencies and external uncertainties such as further unrest in the Middle East may put a brake on their gains, but should not reverse the trend, they added.
"Where do you think investors will park their money after recent profit taking? With developed economies recovering and Portugal's problems not spreading, Asia is the best answer for now," said Jeong My-young, a currency strategist of Samsung Futures in Seoul.
Global liquidity was also boosted as the Bank of Japan stepped up fund injections after this month's devastating earthquake and nuclear crisis. Liquidity will keep supporting Asian currencies, Jeong added.
BoJ's current account balance, or the amount of funds banks hold in their deposits at the central bank, was seen likely to reach 42.6 trillion yen, matching a record high set on Thursday.
Emerging Asian currencies were major winners in late 2010 when liquidity rose due to the Federal Reserve's QE2, although gains were pared year on worries early this year about inflation in the region and risk aversion following Japan's earthquake and tsunami.
With investors' appetite for Asian currencies returning, caution also grew over possible dollar-buying intervention by regional central banks.
Foreign-exchange authorities from most of Asia stepped in to check the pace of strengthening by their currencies, dealers said, with South Korea spotted buying dollars minutes before the local market closed.
"It now seems like risk appetite is still strong in Asia despite the risks in MENA (Middle East and North Africa) and Portugal. But the external risks also mean Asian central banks will try to curb the strength in their currencies despite inflation," said Ho Woei Chen, an economist at United Overseas Bank in Singapore.
Still, authorities are unlikely to push down their currencies as they are trying to stem inflationary pressure, analysts and dealers said.
WON
The won cut some of its earlier gains, after hitting its highest level in more than a month, on intervention by authorities.
"We had expected the authorities to allow the won's strength with inflationary pressure getting more visible. But they appeared to step in the market because the won kept rising," said a foreign bank dealer in Seoul.
Earlier, the won gained as much as 0.8 percent to 1,112.6, the strongest since Feb. 21 as offshore players dumped dollar holdings to stop losses and built up fresh dollar short-positions.
Foreign investors bought local shares for an eighth consecutive session and exporters such as shipbuilders chased the won.
The authorities had not been in the market during the most of local trade, dealers said. But the last minute-intervention bolstered caution over more moves.
"Everybody was reluctant to buy the won more around this level as the authorities secured enough power especially after dollar-selling intervention between 1,130-1,140," said another foreign bank dealer said.
PESO
The peso gained as investors expect the central bank to again raise interest rates later this year to fight inflation, although it was spotted buying dollars to check the Philippine currency's strength.
The peso threatened to strengthen past 43.300 per dollar, around the 61.8 pct Fibonacci retracement level of its November-January weakening. If the resistance line is clearly broken, it has room to fall to 42.960, the 76.4 pct retracement level.
"PHP is appreciating due to the BSP (central bank) hike yesterday and the perception that they may do more rate hikes this year. There is a chance that PHP may appreciate further to 43," said a dealer in Manila.
But another dealer said the peso is unlikely to rise much from this level as investors need to see more concrete solutions on the euro zone's debt crisis.
"There is little risk we see this below 43.25. There are a lot of risks still existing globally that the market seems to be ignoring for now," heAFP
RUPIAH
The rupiah got to a four-year high against the dollar on foreign fund inflows to Indonesia's stock markets.
The Indonesian currency strengthened to as firm as 8,700 versus the greenback, the strongest since May 2007.
The central bank was spotted buying dollars, which was seen preventing it from strengthening past the level, between 8,705 and 8,710.
Still, the intervention did not erase market expectations that Indonesia would let the rupiah appreciate more to contain rising prices as long that did not hurt the country's economic growth, dealers said.
"It (the central bank) will let it go if the commodity prices keep increasing and the lower level of USD/IDR will not affect the Indonesian exports," said a Jakarta-based dealer, adding that a firm rupiah will help ease inflationary pressure.
Jakarta stocks have benefited as the recent nuclear crisis in Japan has increased expectations for higher demand for energy resources such as coal.
Indonesia is the world's top thermal coal exporter.
TAIWAN DOLLAR
The Taiwan dollar rose Friday as foreign investors did their biggest buying of the island's shares so far this month.
They said there were sporadic bids from foreign investors and exporters for Taiwan dollars Friday morning but the market remained cautious about the situation in the Middle East and Japan.