Most Asian currencies lost ground Monday while the U.S. dollar strengthened modestly as risk-sensitive traders moved to the safety of the greenback following a weekend flare-up between Washington and Tehran. Markets were also cautious ahead of a series of significant economic readings in both Asia and the U.S., and a fragile ceasefire between the two sides that is due to expire this week.
The dollar index and its futures rose about 0.2% in Asian trading, reversing part of a two-week slide. The currency benefited from increased safe-haven bids after U.S. President Donald Trump said the U.S. had fired on and seized an Iranian vessel that had attempted to breach a naval blockade.
Tehran condemned the action, accusing Washington of violating the ceasefire. Iran responded by blocking the Strait of Hormuz after briefly reopening the waterway late last week. Mr. Trump said additional talks with Iran were scheduled to take place in Pakistan in the coming days, but Iranian media indicated Tehran had not agreed to enter negotiations. Those mixed signals have left markets uncertain as the ceasefire approaches its scheduled expiry on Tuesday.
Beyond geopolitical developments, traders were looking ahead to U.S. retail sales data due on Tuesday for further cues on economic momentum and potential market direction. With major data points pending in both regions, many investors opted to stay on the sidelines until the implications of the Iran situation and incoming economic prints become clearer.
In Asia specifically, the Chinese yuan showed little movement Monday after the People’s Bank of China left its benchmark loan prime rate unchanged at record low levels. USD/CNY traded close to its weakest point in three years despite the central bank’s series of relatively strong midpoint fixes that had previously supported the currency.
Other regional currencies registered broader losses. The Japanese yen weakened, with USD/JPY rising about 0.2% as traders prepare for Japanese trade data and consumer price index information later in the week. The Australian dollar retreated, with AUD/USD down roughly 0.2% after pulling back from a near two-year high that had been fuelled by bets on further Reserve Bank rate hikes.
Currency moves were more pronounced in some markets: the South Korean won underperformed, with USD/KRW up about 0.6%. The Singapore dollar and the Indian rupee also saw declines versus the dollar, with USD/SGD higher by around 0.2% and USD/INR up roughly 0.1%, though the rupee remained well below the record highs reached earlier in the month.
Overall, the market reaction combined geopolitics and macroeconomic caution: a stronger dollar on safe-haven flows, yet restrained losses for regional currencies amid expectations that the U.S. might refrain from substantially widening its military response and as investors await key data releases.