Asian currencies steady on Middle East situation

The yuan’s onshore pair USD/CNY traded largely unchanged, won’s USD/KRW pair edged up 0.1%, Singapore dollar’s USD/SGD edged down 0.1% each, Australian dollar’s AUD/USD pair declined 0.2%, while yen’s USD/JPY pair was broadly steady

Asian currencies were largely muted on Wednesday as new Iran-U.S. attacks dampened hopes for a near-term peace deal, while investors also awaited U.S. inflation report that could shape expectations for the central bank’s policy.

Iran said on Wednesday it had targeted U.S. bases in Jordan and several Gulf states in response to U.S. president’s decision to order strikes near the Strait of Hormuz.

The escalation raised concerns over oil supplies and pushed crude prices higher, adding to worries that energy-driven inflation could remain higher worldwide.

The yuan’s onshore pair USD/CNY traded largely unchanged.

Data on Wednesday showed China’s consumer inflation remained subdued in May even as factory-gate inflation accelerated to its highest level in nearly four years.

The won’s USD/KRW pair edged up 0.1%.

The Indian rupee’s USD/INR pair and the Singapore dollar’s USD/SGD edged down 0.1% each.

The Australian dollar’s AUD/USD pair declined 0.2%.

The yen’s USD/JPY pair was broadly steady. Data showed Japan’s producer prices increased 6.3% in May from a year earlier, exceeding forecasts and reinforcing expectations that the Bank of Japan could continue normalising monetary policy at next week’s meeting.

In other news, markets are now also awaiting U.S. consumer inflation data, due later on Wednesday, which could offer new clues on the central bank’s interest-rate outlook.

A hot inflation print would reinforce higher-for-longer US rate expectations, supporting broad USD strength, particularly with the US–Iran conflict showing no signs of a swift resolution, MUFG analysts said in a note.

The US Dollar Index was little changed as of 04:46 GMT but remained near a two-month high hit earlier this week.