Asian Currencies Rise as Iran Ceasefire Boosts Market Sentiment
Most Asian currencies moved higher on Wednesday, supported by a weaker U.S. dollar and improved global risk appetite. The shift in sentiment followed U.S. President Donald Trump’s announcement of a temporary ceasefire agreement with Iran.
At the same time, investors remained focused on central bank developments across the region, particularly the Reserve Bank of India’s upcoming policy decision.
Dollar Weakens to Four-Week Low
The U.S. Dollar Index dropped nearly 1%, reaching its lowest level in four weeks. Dollar index futures also declined by 0.9% during early trading, reflecting broad weakness in the greenback as risk sentiment improved.
Iran Ceasefire Lifts Markets, Oil Prices Drop
Trump confirmed late Tuesday that a two-week ceasefire had been agreed with Iran, just hours before a deadline for potential military action related to the Strait of Hormuz.
The agreement, reportedly facilitated through mediation efforts led by Pakistan, aims to open a path toward broader negotiations. The ceasefire depends on Iran ensuring the full and safe reopening of the Strait of Hormuz.
Following the announcement, oil prices dropped sharply, falling below $100 per barrel in early Wednesday trading.
Analysts noted that easing tensions is particularly positive for Asian economies, which are highly sensitive to disruptions in energy supply routes.
Chinese Yuan Hits Three-Year High
The Chinese yuan strengthened significantly, reaching a three-year high against the U.S. dollar. The USD/CNY pair fell 0.5% to 6.82, marking its lowest level since March 2023.
Other Asian currencies also posted gains. The Japanese yen strengthened with USD/JPY falling 0.8%, while the South Korean won surged, pushing USD/KRW down 1.4%. The Singapore dollar also advanced, with USD/SGD declining 0.6%.
RBNZ Holds Rates Steady, RBI Decision in Focus
The New Zealand dollar climbed 1.7%, supported after the Reserve Bank of New Zealand kept its benchmark interest rate unchanged at 2.25%, in line with market expectations.
However, the central bank warned that elevated oil prices due to Middle East tensions could increase inflation pressures, even as economic growth shows signs of slowing.
Meanwhile, attention is turning to the Reserve Bank of India, which is expected to announce its policy decision later in the day. Markets widely anticipate that the RBI will keep its repo rate unchanged at 5.25% as it evaluates global uncertainty and volatile oil prices.
Market Focus Shifts to U.S. Inflation Data
Investors are also closely watching the upcoming U.S. consumer price index (CPI) report scheduled for Friday. The data is expected to play a key role in shaping expectations for the Federal Reserve’s next moves and the broader direction of global monetary policy.
