Asian currencies traded within a narrow range on Tuesday as rising oil prices and ongoing tensions in the U.S.-Israel-Iran conflict kept investor sentiment cautious across the region.
The Australian dollar erased its earlier gains and remained largely flat after the Reserve Bank of Australia (RBA) delivered a widely expected interest rate hike. However, the decision was more divided than anticipated, adding uncertainty to the currency’s direction.
Market attention is now shifting toward a series of major central bank meetings this week, with the U.S. Federal Reserve’s policy decision on Wednesday taking center stage.
Meanwhile, the U.S. dollar index and its futures edged slightly higher during Asian trading hours, recovering after pulling back from near 10-month highs in the previous session.
The AUD/USD pair briefly rose but later stabilized, trading just 0.1% higher after the RBA increased interest rates by 25 basis points to 4.10%. Notably, the decision revealed a split within the central bank, as four out of nine policymakers voted to keep rates unchanged.
RBA Governor Michele Bullock stated that all board members supported a rate hike in principle, with disagreement only on the timing. Her remarks were interpreted as hawkish, although she avoided providing clear guidance on future policy moves.
The rate increase had largely been priced in by markets following recent hawkish signals from the RBA, as policymakers respond to renewed inflation pressures. The central bank also highlighted potential inflation risks linked to the ongoing Middle East conflict.
In Japan, the yen showed signs of recovery after recent weakness. The USD/JPY pair rose 0.2%, although it remained below levels seen near a 19-month high last week. Japanese authorities have reiterated their readiness to intervene in currency markets if volatility intensifies.
The Bank of Japan is also expected to hold interest rates steady at its upcoming meeting, while maintaining a hawkish tone. Governor Kazuo Ueda indicated that underlying inflation is gradually moving toward the central bank’s 2% target, raising the possibility of future policy tightening.
Across the broader region, Asian currencies remained subdued as geopolitical risks continued to weigh on market sentiment. The Chinese yuan strengthened slightly, supported by a firmer daily reference rate set by the central bank.
The Singapore dollar weakened modestly after data showed that non-oil exports grew less than expected in February. The South Korean won also declined, while the Taiwan dollar moved slightly lower.
India’s rupee edged higher but remained below recent record levels, with signs suggesting possible intervention by the Reserve Bank of India to stabilize the currency.
Overall, Asian currencies continue to face pressure from elevated oil prices, as most economies in the region rely heavily on energy imports. Ongoing disruptions in the Middle East, particularly around the Strait of Hormuz, have heightened concerns over supply stability and economic impact.
