Asian Currencies Weaken as Iran Peace Hopes Fade
Most Asian currencies moved lower on Monday as fading hopes for a U.S.-Iran peace agreement reduced investor appetite for riskier assets.
Market sentiment weakened after geopolitical tensions in the Middle East escalated, although the Chinese yuan found support following stronger-than-expected inflation data from China.
At the same time, the U.S. dollar strengthened after solid American jobs data reduced expectations for near-term Federal Reserve interest rate cuts.
Trump Rejects Iran Proposal, Raising Market Concerns
Investor caution increased after President Donald Trump described Iran’s response to Washington’s peace proposal as “totally unacceptable.”
The comments reduced expectations for a quick resolution to the ongoing Gulf conflict and fueled concerns about prolonged instability in the region.
Oil prices surged more than 4% as traders feared continued disruptions around the Strait of Hormuz, one of the world’s most important oil shipping routes responsible for nearly 20% of global crude flows.
Reports indicated that Iran’s counterproposal demanded sanctions relief, limited recognition of its nuclear program, and the withdrawal of U.S. naval forces near the Strait of Hormuz.
Meanwhile, Washington reportedly pushed for a ceasefire agreement and stricter limits on Iran’s uranium enrichment activities.
South Korean Won Leads Regional Currency Losses
The South Korean won recorded the largest losses among major Asian currencies, with the USD/KRW exchange rate rising 0.9%.
The Indian rupee also weakened, with the USD/INR pair climbing 0.4%, while Singapore’s dollar slipped as USD/SGD rose 0.3%.
The Australian dollar moved lower as the AUD/USD pair declined 0.3% amid broader weakness in risk-sensitive currencies.
Japanese Yen Stabilizes After Intervention Speculation
The Japanese yen also weakened against the U.S. dollar, with the USD/JPY pair rising 0.3%.
However, losses in the yen remained relatively limited due to expectations that Japanese authorities could intervene again to support the currency.
Last week, the yen briefly touched a near two-year low before sharp rallies triggered speculation that Tokyo had intervened in currency markets with an estimated $35 billion operation.
Analysts believe Japanese officials remain highly focused on preventing excessive weakness in the yen.
China Inflation Data Supports the Yuan
The Chinese yuan remained relatively stable after China released stronger-than-expected inflation data.
The onshore USD/CNY pair edged 0.1% higher as markets reacted to rising consumer and producer prices.
China’s consumer price index increased 1.2% year-over-year, beating forecasts and accelerating from 1.0% in March.
Producer prices surged 2.8%, marking the fastest pace in 45 months and significantly exceeding market expectations of around 1.7%.
According to ING analysts, higher energy prices linked to the Iran conflict played a major role in boosting inflation pressures across China.
Markets Focus on Trump-Xi Summit in Beijing
Investors are now closely watching President Donald Trump’s upcoming visit to Beijing later this week.
China confirmed that Trump will meet President Xi Jinping for discussions expected to focus on trade relations, Taiwan, and the ongoing Iran crisis.
The summit is seen as a key geopolitical event that could influence global markets, trade policy, and investor sentiment in the coming weeks.
