Asian foreign-exchange markets were muted on Monday as investors weighed a tentative cessation of hostilities between the U.S. and Iran against a busy week of economic releases across Asia, with the New Zealand dollar marking steep monthly losses.
Sentiment remained cautious after the two countries exchanged strikes over the weekend before agreeing to stop further retaliatory attacks and to meet in Qatar on Tuesday. The truce provided some short-term support to risk assets but left the broader Middle East outlook uncertain, keeping traders on alert.
Attention is shifting to a crowded regional calendar that could influence expectations for monetary policy across Asia. Key items include China’s official manufacturing purchasing managers index, South Korea’s trade balance and industrial production figures, Japan’s quarterly Tankan business survey and PMI readings, Indonesia’s inflation report, and India’s industrial production data. Each release has the potential to change the near-term outlook for growth and policy in its respective market.
Dollar, kiwi and aussie moves
The New Zealand dollar traded near $0.564 against the U.S. dollar, leaving it down roughly 5.9% for June and on track for its largest monthly drop since 2024. Expectations that the Reserve Bank of New Zealand would need to tighten aggressively to counter energy-related inflation have eased in recent weeks. While lower oil prices tied to the tentative U.S.-Iran ceasefire have eased immediate inflation pressures, market participants remain concerned about the longer-term economic effects stemming from the earlier energy shock. A generally firmer U.S. dollar added further pressure to the kiwi.
The Australian dollar also remained under pressure, hovering around $0.689 and headed for a monthly decline exceeding 4% as traders assessed domestic growth prospects ahead of Reserve Bank of Australia commentary scheduled for this week.
Dollar broadly steady; China and Korea data in focus
The U.S. dollar was largely unchanged in Asian trading. The U.S. Dollar Index hovered around 101.4 and was on course for about a 2.5% gain in June, which would mark its strongest monthly performance since last July, supported by resilient U.S. economic data and continued demand for safe-haven assets.
Markets are looking to China for signs of stabilization. Official manufacturing PMI figures this week are expected to inch back into expansionary territory, and investors will also watch industrial profits and a new overnight reverse repo operation from the People’s Bank of China for signals on monetary settings. The USD/CNH was little changed at around 6.80 per dollar on Monday after posting modest gains in the prior week.
South Korea’s upcoming export and industrial production reports are expected to reflect ongoing strength in semiconductor demand, with ANZ economists forecasting a pronounced rebound in shipments and factory output after a period of temporary weakness earlier in the quarter. Higher energy costs are expected to feed into consumer prices, contributing to an acceleration in inflation there.
In Japan, investors were preparing for the Bank of Japan’s quarterly Tankan survey, where business sentiment is forecast to improve despite recent disruptions tied to energy. Manufacturing and services PMI readings will be scrutinized for signs that activity is gaining momentum heading into the third quarter.
Currencies around the region were largely steady. The JPY/USD rate was little changed at 161.75 per dollar, while the KRW/USD traded flat near 1,545.8 against the greenback. The USD/CNH remained around 6.80 per dollar.
Markets entered the week balancing a fragile geopolitical détente that provided only tentative reassurance and a compact lineup of data releases capable of shifting central bank expectations and risk sentiment across Asia.
Key points
- New Zealand dollar near $0.564, down about 5.9% for June and headed for its largest monthly fall since 2024 - impacts currencies and monetary policy expectations.
- Australian dollar trading near $0.689 and pointing to a monthly decline of more than 4% as investors await RBA commentary - affects domestic FX and growth outlook.
- U.S. dollar flat at around a 101.4 index level and on track for a roughly 2.5% monthly gain; China and South Korea data this week could alter market views on Asian monetary policy and trade flows.
Risks and uncertainties
- The U.S.-Iran ceasefire is fragile and leaves the Middle East outlook uncertain, which could revive safe-haven flows and move FX markets - relevant to currencies and commodity-linked inflation.
- A string of regional economic releases could shift expectations for central bank action in Asia, introducing volatility into currencies and bond markets.
- Lingering effects from the earlier energy shock remain a concern for inflation trajectories, particularly in economies sensitive to energy costs, and could influence central bank policy decisions.