Most Asian currencies were little changed on Thursday following strong advances in the prior session, as a sharp decline in crude oil—sparked by reports of progress toward a U.S.-Iran deal—weighed on the dollar and eased energy-cost concerns across the region.
The U.S. Dollar Index traded largely flat through Asian hours after slipping 0.4% overnight. The pullback in the dollar came alongside a rout in oil, which plunged more than 7% after an Axios report that the White House was close to a memorandum of understanding with Iran aimed at ending the conflict.
Lower crude prices provided relief to oil-importing economies in Asia by softening worries over near-term inflation and external balances. Those concerns had been heightened in recent months after a crisis in the Strait of Hormuz sent energy prices markedly higher, contributing to wider costs pressures.
Currency markets reflected the changing risk tone. With geopolitical tensions easing, demand for traditional safe-haven assets such as the dollar declined. "Further de-escalation in the Middle East, such as Iran accepting the US proposed deal and a gradual reopening of the Strait of Hormuz, could continue to support gains in Asia FX," MUFG analysts said in a note.
Specific moves were muted on Thursday after pronounced shifts on Wednesday. The USD/JPY pair was flat in Asian trading following a near 1% fall in the previous session. Mainland China's onshore USD/CNY and the offshore USD/CNH both edged down about 0.1%.
The South Korean won showed some follow-through from the prior session's move: USD/KRW rose 0.5% on Thursday after tumbling 1.6% overnight. The Indian rupee's USD/INR pair inched about 0.2% higher, while the Singapore dollar's USD/SGD remained largely unchanged.
In Australia, domestic trade figures added a local market data twist. The Australian dollar traded flat after the country unexpectedly recorded a trade deficit in March. Officials reported a deficit of A$1.84 billion, a marked miss versus forecasts that had pointed to a A$4.25 billion surplus, a sign of strain from weaker commodity exports and stronger imports.
Policy discussions remain relevant to market positioning. Minutes from the Bank of Japan's March meeting indicated that several policymakers saw scope to raise interest rates further if an Iran-related energy shock persisted and inflationary pressures broadened. That conditional language underscores the influence of energy price moves on central bank deliberations in the region.
Investors are now looking ahead to Friday's U.S. payrolls report for fresh clues on the Federal Reserve's rate trajectory. The jobs data is likely to figure prominently in near-term positioning as markets weigh the combined implications of softer energy prices, central bank commentary, and incoming economic indicators.
Context and market impact
- Oil's more than 7% decline reduced a key input to inflation and trade balance risks for oil-importing Asian economies.
- Currency moves were generally modest on Thursday after larger shifts the previous session.
- Domestic data and central bank minutes continued to influence local currency dynamics, notably in Australia and Japan.