Most Asian currencies and the U.S. dollar were little changed on Tuesday as market participants remained cautious ahead of a U.S. deadline that could precede military strikes on Iran.
The U.S. Dollar Index rose about 0.1% during Asian trading, with U.S. Dollar Index futures trading roughly 0.1% higher as of 02:05 ET (06:05 GMT).
Geopolitical clock drives caution
Markets were watching a deadline set by President Donald Trump at 8 p.m. ET for Iran to reopen the Strait of Hormuz, after Tehran rejected a U.S.-backed ceasefire proposal. The U.S. president has warned of possible strikes on Iranian infrastructure, saying that "the entire country can be taken out in one night." With no clear signs that tensions were subsiding, investor sentiment remained fragile.
Reflecting that fragility, MUFG analysts said in a note: "Our continued assessment is that the path towards peace is narrow and unlikely, given the wide gap in expectations among the different parties in this war."
Currency moves across Asia
Currency pairs in Asia showed only modest changes overall. The Japanese yen was steady with USD/JPY trading flat. The South Korean won strengthened slightly as USD/KRW edged down about 0.3%. China's onshore dollar pair, USD/CNY, ticked down about 0.1%, while USD/SGD remained largely unchanged. The Australian dollar also traded with little movement against the dollar.
By contrast, the Indian rupee weakened, with USD/INR rising approximately 0.3% as market participants awaited the Reserve Bank of India's interest-rate decision due Wednesday. The rupee had strengthened the prior week after RBI steps aimed at reducing speculative positioning, but that momentum was tempered by geopolitical concerns and higher crude oil prices.
Economic data on deck
Beyond geopolitics, investors are focused on U.S. economic releases later in the week. The U.S. consumer price index for March is due on Friday and is expected to show a notable increase, driven largely by higher fuel costs tied to the Middle East conflict. Analysts at ING noted that Friday's March CPI is likely to show annual headline inflation jumping to 3.4% from 2.4% on gasoline price hikes, and they highlighted that the University of Michigan's consumer sentiment report, released 90 minutes later, will also be important.
Outlook
With a mixture of geopolitical risk and upcoming economic data, currency-market participants are positioned to react to both headline developments surrounding Iran and incoming U.S. inflation figures. Central-bank action in India this week adds a regional policy event that could influence Asian FX flows.