Asian currencies traded in a narrow range on Monday as investors remained cautious amid ongoing uncertainty surrounding the U.S.-Israel conflict with Iran. The situation kept global markets on edge and pushed the U.S. dollar close to a 10-month high ahead of the upcoming Federal Reserve policy meeting. Market participants remained reluctant to take large positions as geopolitical tensions continued to dominate sentiment across the foreign exchange market.
The Australian dollar stood out among regional currencies, gaining strength ahead of the Reserve Bank of Australia (RBA) policy decision scheduled for Tuesday. Analysts widely expect the central bank to raise interest rates, which has supported demand for the Aussie in recent trading sessions.
Across the broader Asian currency market, most currencies struggled to gain momentum as the conflict involving Iran showed little sign of easing. The ongoing tensions have kept oil prices elevated, raising concerns that energy-driven inflation could persist globally.
Oil prices briefly stabilized after U.S. President Donald Trump called for a coalition of countries to address potential supply disruptions linked to the Iran conflict. Nevertheless, uncertainty surrounding energy supply continues to influence currency markets and investor sentiment.
Meanwhile, the Chinese yuan remained relatively steady despite stronger-than-expected economic data from China. The USD/CNY pair edged up 0.1% after industrial production and retail sales figures for the first two months of 2026 exceeded forecasts. The data suggested that manufacturing activity remained solid, supported by strong export demand, while consumer spending improved during the Lunar New Year holiday period.
China also reported unexpected growth in fixed asset investment during the January–February period, marking the first expansion since August 2025. The increase suggests improving business confidence, particularly as investment in artificial intelligence and advanced technologies continues to rise.
However, China’s unemployment rate unexpectedly increased during the same period, highlighting lingering weaknesses in parts of the country’s economy despite the stronger activity data.
Other Asian currencies remained mostly stable. The Japanese yen strengthened slightly, with the USD/JPY pair declining by 0.1%, while the Singapore dollar traded flat against the U.S. dollar.
The Indian rupee weakened marginally, with the USD/INR pair rising 0.1% and reaching a record high of 92.711 rupees. India is considered particularly vulnerable to energy supply disruptions in the Middle East, which has added pressure to the currency amid rising oil prices.
The South Korean won also weakened, with the USD/KRW pair falling 0.3% during Monday’s trading session.
The Australian dollar continued to outperform in the region, with the AUD/USD pair gaining around 0.4%. The currency’s strength was largely driven by expectations that the RBA will raise interest rates by 25 basis points to 4.10% at the end of its two-day meeting on Tuesday.
The central bank last increased rates in December and has indicated the possibility of further tightening after inflation picked up again in late 2025. Recent comments from RBA officials highlighted concerns that energy market disruptions caused by the Iran conflict could increase inflation risks, reinforcing expectations of additional rate hikes this year.
Meanwhile, the U.S. dollar remained near a 10-month high as investors sought safe-haven assets amid ongoing geopolitical tensions. The dollar index and dollar index futures stabilized during Asian trading hours after surging to their highest levels in ten months on Friday.
Demand for the greenback has been supported by fears that the Iran conflict could further disrupt global oil markets, potentially pushing energy prices higher and increasing inflation pressures worldwide.
Attention is now turning to the Federal Reserve meeting scheduled for later this week. The central bank is widely expected to keep interest rates unchanged as policymakers assess the economic outlook and rising geopolitical risks.
At the same time, concerns related to the Iran conflict have prompted markets to reduce expectations for potential Federal Reserve rate cuts in the coming months, further supporting the U.S. dollar.
