Asian forex weakens amid concerns over Middle East war

The Indian rupee was among the worst performers on Monday, with the USD/INR pair adding 0.3% and surpassing 94 rupees for the first time ever

Most Asian currencies weakened on Monday as markets feared an escalation in the U.S.-Israel war on Iran.

Markets also remained on edge as oil prices rose, fuelling concerns over energy-driven inflation and hawkish central banks across the world.

The dollar index and dollar index futures both steadied in Asian trade after losing some ground last week.

The Indian rupee was among the worst performers on Monday, with the USD/INR pair adding 0.3% and surpassing 94 rupees for the first time ever.

India is seen as among the more vulnerable countries to disruptions in oil and gas supplies, with rising oil prices expected to weigh heavily on the rupee.

India imports around 80% of its oil and gas consumption, with a bulk of its shipments coming from the Middle East.

Still, deeper declines in the rupee have been deterred by continued intervention by the Reserve Bank of India in foreign exchange markets.

The won’s USD/KRW pair added 0.2%, but traded below a 17-year high hit earlier in the session.

The won took some support from bets that new Bank of Korea Governor Shin Hyun-song was a hawkish pick for the role, and that interest rates could rise later this year.

Shin– who is most famous for predicting the 2008 financial crisis– said he will seek a more “balanced” policy approach.

But analysts viewed past statements from Shin as leaning hawkish, given that he has spoken against overlending, excessive liquidity, and inflation.

ING analysts said that the BOK under Shin could hike interest rates by as soon as July, especially as the Iran crisis presents more inflationary pressures.

Broader Asian currencies largely weakened, with the yen’s USD/JPY pair advancing 0.1%, while the yuan’s USD/CNY pair rose nearly 0.4%.

The Singapore dollar’s USD/SGD pair advanced 0.1%, while the Australian dollar’s AUD/USD pair slipped 0.6%.