The Singapore dollar hit a 10-year high versus the U.S. dollar on Wednesday after the central bank surprised markets by tightening monetary policy slightly, and other Asian currencies firmed as share prices rose.

The Monetary Authority of Singapore (MAS), in a biannual review, said that it would maintain its policy of a "gradual and modest appreciation" in the Singapore dollar but slightly increased the slope of its trade-weighted band.

The Singapore dollar steadied near 1.4670 against the U.S. dollar after rising as high as 1.4625, up almost 0.8% from late Asian trade on Tuesday and its strongest level since August 1997.

Analysts expect the central bank to tolerate faster currency appreciation to help temper inflation, which hit a 12-year high of 2.9% in August alongside blistering economic growth.

"The change in the slope means that the Singapore dollar would appreciate faster," said Chua Hak Bin, an economist at Citigroup. "This shows that they are concerned about inflationary
pressures and overheating of the economy."

The central bank conducts monetary policy by steering the Singapore dollar in a band against a trade-weighted basket of currencies rather than setting interest rates as most central banks do.

Traders expect the currency to strengthen further, but they cautioned that the central bank might intervene if it rose too fast.

"I suspect the MAS was in, lifting the greenback to counter over-speculation on the downside after its policy changes," said Markus Ammann, director of foreign exchange at HVB. "Some punters speak of 1.40 already ... I doubt we will go that low in the next 1-2 months," he said.

The currency has gained about 2.7% since Sept. 18, when the Federal Reserve slashed its key interest rate by 50 basis points and sparked a rally in most Asian currencies.

That brought its gains against the U.S. currency this year to about 4.5%, trailing behind the Indian rupee, the Philippine peso and the Thai baht.

Asian stocks helped buoy sentiment in currency markets, with MSCI's measure of Asia Pacific stocks excluding Japan rising 1% to a record high.

Continued buying interest in high-yielding assets pushed the peso as high as 44.155 against the dollar, up about a third of a percent from Tuesday's close.

"Capital inflows, including speculative inflows, should push for a stronger peso until the year-end," said a trader in Manila. "There has been constant intervention (by the central bank), but I don't think they can stop the trend," he said.

The Indonesian rupiah, another high-yielder, went as high as 9,050 per dollar, up almost 0.4% from late Asian trade on Tuesday. The Malaysian ringgit gained about half a percent to 3.383 against the dollar.