Asian currencies rose sharply on Wednesday, supported by a weaker dollar after U.S. President Donald Trump agreed to a temporary ceasefire with Iran, while the central banks of India and New Zealand held interest rates steady.
The US Dollar Index slipped nearly 1% to a four-week low. US Dollar Index Futures also traded 0.9% lower as of 01:29 ET (05:29 GMT).
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Trump announces Iran ceasefire; Chinese yuan hits 3-yr high Trump said late Tuesday he had agreed to a two-week “double-sided” ceasefire with Iran, just hours before a self-imposed deadline to launch large-scale strikes if Tehran failed to reopen the Strait of Hormuz.
The truce was brokered through last-minute mediation efforts led by Pakistan and is intended to create a narrow window for negotiations toward a broader peace deal.
The ceasefire is conditional on Iran ensuring the “complete, immediate and safe” reopening of the Strait.
Oil prices plunged below $100 per barrel in early trade on Wednesday.
"These negotiations and a pulling back from the brink is certainly a positive including for Asia which has been and continues to be disproportionately hurt by a Strait of Hormuz closure," MUFG analysts said in a note.
The onshore Chinese yuan rose to a three-year high against the dollar, with the USD/CNY pair slipping 0.5% to 6.82 yuan -- its lowest since March 2023.
The Japanese yen’s USD/JPY pair dropped 0.8%, while the South Korean won’s USD/KRW pair tumbled 1.6%.
The Singapore dollar’s USD/SGD declined 0.6%.
India, NZ cenbanks keep rates unchanged Focus in Asia turned to the Reserve Bank of India, which kept its benchmark repo rate unchanged at 5.25%, in line with expectations, as policymakers balanced rising inflation risks against a still-fragile growth outlook.
RBI Governor Sanjay Malhotra noted that while the U.S. and Iran did announce a ceasefire, lingering disruptions in energy, shipping, and insurance markets were likely to impact growth.
The Indian rupee trimmed some early gains, with the USD/INR pair trading 0.3% lower after the central bank decision.
The New Zealand dollar’s NZD/USD pair jumped 2%, and was further supported after the Reserve Bank of New Zealand kept its official cash rate unchanged at 2.25%, in line with expectations.
The central bank warned that higher oil prices linked to the Middle East conflict would likely push inflation higher in the near term, even as economic activity softens.
Elsewhere, the Australian dollar’s AUD/USD pair climbed 1.5%.
Market participants are also turning their focus to the upcoming U.S. consumer price index report due on Friday, expected to provide further direction for the dollar and global monetary policy outlook.
