Asian currencies flat amid fragile Middle East ceasefire

Attention is squarely on China’s manufacturing activity, South Korea’s trade and industrial output, Japan’s Tankan business survey and PMI readings, Indonesia’s inflation data, and India’s industrial production

Asian currencies traded in narrow ranges on Monday as investors weighed a fragile easing in tensions between Iran and the US against a busy week of economic data, while the New Zealand dollar remained on track for its sharpest monthly decline in nearly two years.

Market sentiment remained cautious after Tehran and Washington traded new accusations over the weekend before agreeing to halt further retaliatory attacks and meet in Qatar on Tuesday, offering tentative support for a ceasefire while leaving uncertainty over the Middle East outlook intact.

Attention is squarely on a packed calendar that includes China’s manufacturing activity, South Korea’s trade and industrial output, Japan’s Tankan business survey and PMI readings, Indonesia’s inflation data, and India’s industrial production, all of which could shape expectations for monetary policy across Asia.

The NZD/USD slid to nearly $0.564, leaving it down nearly 5.9% for June and on track for its largest monthly decline since 2024.

Earlier expectations that the Reserve Bank of New Zealand would need to tighten policy aggressively to contain energy-driven inflation have eased in recent weeks. While lower oil prices following the tentative Iran-U.S. ceasefire have reduced immediate inflation concerns, investors remain wary of the longer-lasting economic effects from the earlier energy shock. Continued strength in the U.S. dollar has added further pressure to the kiwi.

The AUD/USD also remained under pressure, hovering around $0.689 and heading for a monthly decline of more than 4%, as traders assessed the outlook for domestic growth ahead of Reserve Bank of Australia commentary this week.

Investors are looking to China for further signs of economic stabilization. Official manufacturing PMI data due this week is expected to edge back into expansion territory, while markets will also watch industrial profits and the People’s Bank of China’s new overnight reverse repo operation for clues on the direction of monetary policy. The USD/CNH was little changed at nearly 6.80 per dollar on Monday after posting modest gains last week.

South Korea’s export and industrial production figures are expected to reflect continued strength in semiconductor demand, with ANZ economists forecasting a sharp rebound in shipments and factory output after temporary weakness earlier in the quarter. Inflation is also expected to accelerate as higher energy costs continue to feed into consumer prices.