Asian currencies extended their losses on Tuesday as investors reacted to the escalating conflict in the Middle East. At the same time, the U.S. dollar hovered close to a five-week high, while energy prices stayed elevated amid rising geopolitical tensions.
The US Dollar Index strengthened by 0.2% during Asian trading hours after surging 0.8% overnight on increased safe-haven demand. The index remained near its highest level in five weeks. Meanwhile, US Dollar Index Futures were up 0.3% at 23:50 ET (04:50 GMT), reflecting continued demand for the greenback.
Middle East conflict fuels market uncertainty
Markets remain on edge as the United States and Israel intensified strikes on Iran over the weekend. The attacks reportedly resulted in the death of Supreme Leader Ayatollah Ali Khamenei and prompted retaliatory missile and drone strikes from Tehran. The situation has since broadened, raising fears of wider regional instability.
U.S. President Donald Trump stated that the military operation could last for “some weeks,” adding that it remains unclear who is currently leading Iran following the targeted strike. This uncertainty surrounding Iran’s leadership transition has further unsettled global markets.
Tehran has also threatened to close the Strait of Hormuz and attack any vessel attempting to pass through the strategic waterway. The strait accounts for roughly 20% of global oil shipments, making it a critical route for energy markets worldwide.
The surge in crude oil prices has placed significant pressure on Asian currencies, particularly those of energy-importing economies. Higher oil costs increase trade deficits and inflation risks, weighing on regional exchange rates.
Asian currencies mixed as oil risks mount
Among the weakest performers were the South Korean won and the Indian rupee, both vulnerable to rising energy costs. The USD/KRW pair climbed 0.8%, while USD/INR rose 0.4%, signaling continued depreciation in both currencies.
The Singapore dollar traded largely flat, with USD/SGD showing limited movement.
In contrast, the Chinese yuan strengthened after the People’s Bank of China set the daily midpoint at 6.9088 yuan per dollar, 0.2% firmer than the previous fixing. This marked the strongest upward adjustment in six months. The offshore USD/CNH pair slipped 0.3% following two consecutive days of gains.
The Japanese yen edged 0.1% higher against the dollar after surging 0.8% overnight, supported by fragile global risk sentiment. Meanwhile, the Australian dollar gained 0.3% against the greenback.
Overall, the combination of geopolitical uncertainty, elevated oil prices, and strong U.S. dollar demand continues to shape currency market movements across Asia.
