Asian currencies largely consolidated Wednesday after strong advances in the previous session, while the U.S. dollar slipped as investors grew slightly more willing to take on risk amid signals that military operations involving Iran could wind down in the near term.
The U.S. Dollar Index eased about 0.1% in Asian trading, following a 0.6% decline overnight. U.S. Dollar Index futures were also lower by roughly 0.1% as of 23:52 ET (03:52 GMT).
Geopolitical comments lift risk appetite but leave risks in place
Market participants reacted to remarks from U.S. President Donald Trump that Washington could end its military campaign against Iran within "two to three weeks," a development that helped revive appetite for risk assets and supported gains in several Asian equity markets on Wednesday.
Despite the more optimistic tone, caution persisted. A Wall Street Journal report said President Trump was prepared to end the U.S. military campaign even if the Strait of Hormuz remained largely closed, a detail that underscores continuing threats to global trade flows and energy supplies. Analysts at MUFG cautioned that a sustainable peace remains far from assured, citing unresolved areas of contention including Iran's internal power arrangements, the strategic leverage associated with the Strait of Hormuz, and broader regional tensions. MUFG warned that even a U.S. withdrawal could leave behind an "extremely unstable equilibrium."
Currency movements across Asia
Across Asian FX markets, moves were mostly modest on Wednesday. The Japanese yen was steady after USD/JPY had fallen 0.6% in the prior session. South Korea's won saw USD/KRW tick up roughly 0.2% after a 0.7% decline overnight. India's rupee reversed some of the prior session's losses, with USD/INR climbing about 0.2% to 93.68 rupees following a 1% drop on Tuesday; the currency had reached a record low of 95.22 rupees in the earlier session.
The Chinese yuan's onshore USD/CNY rate was largely unchanged, while the offshore USD/CNH moved down approximately 0.2%. Singapore's dollar held steady against the dollar, and the Australian dollar gained about 0.2% on Wednesday.
China factory PMI highlights cost pressure
New manufacturing survey data from China showed activity expanded for a fourth straight month in March, but the pace of growth slowed and the reading missed expectations. The survey also signalled sharply rising input costs, noting the quickest increase in input prices since March 2022. Analysts attributed part of that rise in costs to higher oil prices connected to the Middle East situation, which is feeding through into manufacturers' cost bases.
What markets are watching next
Investors are looking ahead to forthcoming U.S. economic releases, including the nonfarm payrolls report later in the week, for additional guidance on the outlook for U.S. monetary policy and near-term currency market direction.