Most Asian currencies weakened on Monday, while the dollar caught renewed safe haven bids after tensions between the U.S. and Iran spiked over the weekend, with a tenuous ceasefire set to expire this week.
But losses in regional currencies were limited by growing expectations that the U.S. will back down from harsher action against Iran, as seen in several instances with President Donald Trump since the onset of the war.
Anticipation of a host of key economic readings in Asia and the U.S. also kept investors to the sidelines, as markets waited to see the full impact of the Iran war through March.
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Dollar firms after US captures Iran vessel, Tehran shuts Hormuz again The dollar index and dollar index futures both rose about 0.2% in Asian trade, recovering from two weeks of deep losses.
The greenback caught increased safe haven bids after Trump said the U.S. had fired on and captured an Iranian vessel attempting to break a naval blockade.
Tehran decried the move, accusing the U.S. of breaking their ceasefire. Iran also blocked the Strait of Hormuz after briefly reopening the passage late last week.
Trump said more talks with Iran were set to take place in Pakistan in the coming days. But Iranian media showed Tehran had not committed to any dialogue.
The mixed signals come just before the U.S.-Iran ceasefire expires on Tuesday, leaving markets uncertain over the future of the conflict.
Beyond the Iran war, U.S. retail sales data due on Tuesday is also expected to provide some cues.
Chinese yuan steady after PBOC leaves rates unchanged, Asia FX dithers The Chinese yuan’s USD/CNY pair moved little on Monday after the People’s Bank left its benchmark loan prime rate unchanged at record lows.
But the pair remained close to its lowest levels in three years, after a series of strong midpoint fixes from the PBOC boosted the yuan.
Other Asian currencies broadly weakened. The Japanese yen’s USD/JPY pair rose 0.2% with Japanese trade and consumer price index inflation data due later this week.
The Australian dollar’s AUD/USD pair fell 0.2%, retreating from a near two-year high. Bets on more interest rate hikes by the Reserve Bank were a major boost to the Aussie in recent weeks.
The South Korean won lagged, with the USD/KRW pair rising 0.6%, while the Singapore dollar’s USD/SGD pair rose 0.2%.
The Indian rupee’s USD/INR pair rose 0.1%, but remained well below record highs hit earlier in the month.
