Most Asian currencies eased on Friday, yet retained the prospect of weekly gains as market participants adopted a cautious stance ahead of key U.S. inflation figures and closely observed upcoming discussions linked to a tentative U.S.-Iran ceasefire.
The US Dollar Index climbed around 0.1% during Asian trading hours, even as it was poised to finish the week down by more than 1%.
Ceasefire doubts and diplomatic developments
Regional currencies were buoyed earlier in the week by optimism that a temporary truce between Washington and Tehran could hold and reduce disruptions to oil flows. Still, investor confidence remained fragile as doubts persisted over the durability of the agreement and over what the scheduled talks this weekend might achieve.
Local media reports that a delegation had arrived in Islamabad for negotiations were rejected by Tehran, which said talks with the U.S. remained suspended in response to Israeli strikes in Lebanon. The mixed signals contributed to a cautious tone across FX markets.
U.S. inflation data in focus
Markets were bracing for the U.S. March Consumer Price Index report due later in the day. Economists expected headline inflation to show a modest month-on-month uptick, underpinned by higher energy costs, and investors were positioning ahead of that print.
Individual currency moves
The tentative two-week ceasefire had earlier supported a rebound in a number of Asian currencies, contributing to an overall weekly gain for the region. The Japanese yen saw USD/JPY trade about 0.2% higher on Wednesday, though it was set to finish the week roughly 0.2% lower, with gains limited by domestic interest rate concerns.
The South Korean won moved with USD/KRW up 0.4% on Friday but still appeared headed for a weekly decline approaching 2%.
China's onshore USD/CNY was largely muted on the day, and was positioned for about a 0.8% decline on the week.
Elsewhere, USD/INR inched up around 0.4% on Friday, and USD/SGD gained about 0.2%.
The Australian dollar slipped roughly 0.2% against the dollar on the day, but remained on course for a weekly rise of just over 2.5%.
China price data
Data released on Friday showed China’s consumer inflation rose by less than expected in March, highlighting ongoing disinflationary pressures in the consumer sector even as factory-gate prices returned to growth. The producer price index rose 0.5% year-on-year in March, beating forecasts and rebounding from a 0.9% decline in February. The PPI reading marked a return to expansion for the first time since September 2022 and reflected higher global energy prices that pushed up input costs for manufacturers.
These mixed Chinese inflation readings and the wider geopolitical backdrop helped shape a cautious trading environment in Asian FX markets as the week closed.