Investors continued to bet that Asian currencies would weaken against the dollar, a Reuters poll showed, as hawkish comments by Federal Reserve policy makers and a steady rate hike path buttressed the greenback.
Fed Chairman Jerome Powell said on Wednesday the central bank may raise interest rates above an estimated "neutral" setting as the "remarkably positive" economy continues to grow.
This came after a survey showed the U.S. services sector activity raced to a 21-year high last month, boosting expectations that Friday's payroll report could surprise.
The dollar index against a basket of six major currencies has gained nearly 1 percent since the Fed last Wednesday raised rates as expected and provided an upbeat view of the world's biggest economy. The central bank said it foresees another rate hike in December, three more next year and one in 2020.
The rosy economic view and a steady policy tightening path have largely helped drive up Treasury yields, which rose to over 7-year highs on Thursday, adding further pressure on Asian currencies.
Rising yields have been troublesome for emerging assets as they tend to draw away foreign funds. Emerging Asian countries with ballooning current account deficits due to expensive oil imports, like India and Indonesia, have been the biggest casualties so far this year.
The poll of 11 respondents showed investors increased their bearish bets on the Indonesian rupiah over the past two weeks to a more than five-year high, while raising short positions in the Indian rupee slightly.
Bank Indonesia has tried to shore up the rupiah via intervention and rate hikes. Top government officials also pitched in with positive comments. The finance minister said on Tuesday that the economy was adjusting "quite well" to higher U.S. interest rates and the fall of the rupiah, asserting that many of its economic indicators were good.
The rupiah was down 0.7 percent as of 0557 GMT and has weakened over 10 percent so far this year, making it the second biggest loser in the region after the Indian rupee, which has continued to plumb new lows and forced the central bank to intervene.
"Despite a stronger dollar, crude oil prices continued to remain very elevated, which is putting further pressure on current account deficit currencies that rely on oil imports, India and Indonesia specifically," said Khoon Goh, head of Asia research at ANZ.
"The INR hit yet another record low today and in the near term, it doesn't look like there's any respite coming."
At its policy meeting on Friday, the Reserve Bank of India is expected to raise rates for a third time since June to check inflationary pressures as it grapples with a depreciating currency and surging oil prices.
Short positions on the Philippine peso also piled up as the country's central bank struggles to tame stubbornly high inflation that undermines its GDP growth target.
The central bank will be looking out for September inflation data due on Friday, after it raised benchmark rates last week and said it was open to further tightening.
Annual inflation was expected to have risen last month, moving close to 7 percent, a Reuters poll showed, against the central bank's target of 2 percent to 4 percent.
The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.
The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long U.S. dollars.
The figures include positions held through non-deliverable forwards (NDFs).