Oct. 13 (Bloomberg) -- The Singapore dollar rose to a 10- year high on speculation inflation will accelerate, giving the central bank reason to allow faster gains in its currency.

The local dollar climbed for a fifth week, the longest winning run since the period ended July 20, after a government report showed the economy grew more than most economists expected in the third quarter. The Monetary Authority of Singapore said in a semi-annual report this week that it will ``increase slightly the slope of the policy band'' in which the currency is allowed to trade.

``Inflation is an issue in Singapore and they recently changed policy,'' said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. ``Broad-based strength in Asian currencies is probably the way to go.''

The Singapore dollar advanced to S$1.4650 yesterday from S$1.4744 the week before, according to data compiled by Bloomberg. It was as strong as S$1.4610, a level unseen since 1997.

The Monetary Authority of Singapore, which manages the exchange rate within a trading range against a basket of currencies, ``will continue with the policy of a modest and gradual appreciation,'' it said in an Oct. 10 statement. Inflation will be between 1.5 percent and 2 percent this year and as much as 3 percent in 2008, the MAS said.

The Vietnamese dong was little changed this week.

Vietnam halved its 2007 target for devaluing the dong to 0.5 percent in an attempt to stop inflation from surging, said Le Xuan Nghia at the central bank.

`Too Ambitious'

``We have wanted to curb inflation and support exports at the same time,'' Nghia, director general of the banking department, said in an interview yesterday from Hanoi. ``Some people may say it's too ambitious, but that is what we have pursued in monetary policy making so far.''

The State Bank of Vietnam has bought $7 billion this year, according to estimates from the Asian Development Bank, as foreign investors bought Vietnamese assets and put pressure on the dong to strengthen. By weakening the dong, the price of imported goods has increased and boosted inflation to the fastest since January 2006.

The dong, which closed at 16,084 against the dollar, has weakened 0.3 percent since the start of the year. The central bank has devalued the currency every year since 1995.

Malaysia's ringgit logged a fifth weekly advance on speculation overseas investors were buying local assets as risk appetite increased.

Morgan Stanley & Co. on Oct. 11 raised its forecasts for the ringgit, China's yuan, the Korean won, the Thai baht and the Singapore and Taiwan dollars, on expectations inflation will prompt central banks to tolerate further appreciation.

`More Optimism'

``There's some flow of funds and the Malaysian authorities probably realize it will help cushion the inflation blow a bit,'' said Yeo Chin Tiong, head of treasury at OSK Investment Bank Bhd. in Kuala Lumpur. ``There's more optimism in the currency lately.''

The ringgit traded at 3.3670 against the dollar in Kuala Lumpur, compared with 3.4005 a week ago, according to data compiled by Bloomberg.

Elsewhere, the South Korean won dropped 0.2 percent this week and the Taiwan dollar gained 0.1 percent. Markets in Indonesia and the Philippines were closed yesterday for holidays.

To contact the reporters on this story: Aaron Pan in Hong Kong at Apan8@bloomberg.net

Last Updated: October 12, 2007 21:49 EDT