Dollar steady, Asian currencies flat

Won’s USD/KRW pair dropped 0.2%, the Singapore dollar’s USD/SGD pair declined 0.1%, the yuan’s USD/CNH offshore pair shed 0.1%, while the yen’s USD/JPY outperformed, slipping 0.5%

The dollar steadied in Asian trade on Monday, while Asian currencies kept to a tight band as uncertainty over the Middle East war and the path of interest rates left markets on edge.

Market holidays in Japan and Mainland China kept overall trading volumes muted. The yen firmed further after reported government intervention greatly boosted the currency last week.

The Australian dollar hovered near four-year highs before a widely expected interest rate hike by the Reserve Bank of Australia (RBA) on Tuesday.

Broader currencies showed limited reaction to U.S. president stating that the country will launch an operation to aid ships passing through the Strait of Hormuz, and that indirect talks with Iran were continuing.

The Australian dollar steadied on Monday, with the AUD/USD pair remaining close to its strongest level in almost four years.

The RBA is widely expected to raise interest rates by 25 basis points on Tuesday– its third such move this year– as it works to curb a late-2025 resurgence in inflation.

This resurgence is expected to be worsened by inflationary shocks from the Iran war– a scenario the central bank has repeatedly warned of. Tuesday’s hike will also completely reverse a brief easing cycle undertaken by the RBA in 2025.

But analysts expect an extended pause on rates after Tuesday’s hike, with RBA now having sufficient headroom to wait and watch the effects of the Iran war on the economy.

Broader Asian currencies were mostly flat. Won’s USD/KRW pair dropped 0.2%, while the Singapore dollar’s USD/SGD pair declined 0.1%.

The Indian rupee’s USD/INR pair was flat, steadying just below 94 rupees and record highs hit in April.

The yuan’s USD/CNH offshore pair shed 0.1%, while the yen’s USD/JPY outperformed, slipping 0.5%.

The yen had firmed sharply last week after reported currency market intervention by Tokyo, especially after USDJPY crossed the closely watched level of 160 yen.