Asian currencies posted modest gains on Tuesday, while the U.S. dollar weakened as Washington initiated a blockade on Iranian ships in an effort to push Tehran toward a more durable ceasefire agreement.
Investors also turned their attention to upcoming U.S. producer price index (PPI) data for further signals on the interest rate outlook in the world’s largest economy.
The Chinese yuan strengthened despite disappointing March trade data, which showed exports and the overall trade balance falling short of expectations, even as imports surged well beyond forecasts. Meanwhile, the Singapore dollar remained largely unchanged after first-quarter GDP growth came in below estimates, although the country’s central bank slightly tightened its monetary policy.
Market sentiment was somewhat supported by reports that several Asian and Middle Eastern nations were working to facilitate renewed ceasefire negotiations between the U.S. and Iran.
The dollar index and its futures slipped around 0.1% during Asian trading hours, putting the greenback on track for losses in seven of the past eight sessions. Although the dollar had previously gained on safe-haven demand during the escalation of the Iran conflict, it has since pulled back as investors anticipate possible de-escalation.
The U.S. officially began blockading Iranian ports and vessels on Monday. However, President Donald Trump indicated that Tehran had reached out to Washington expressing interest in a ceasefire. Vice President JD Vance also noted signs of progress, despite limited outcomes from recent peace talks held in Pakistan.
Inflation remains a key concern tied to the conflict, particularly after last week’s data showed a sharp rise in U.S. consumer prices for March. Markets are now awaiting the latest PPI figures for further direction.
In China, the yuan gained as data revealed a sharper-than-expected drop in the trade surplus. Export growth slowed, partly due to disruptions caused by the Iran conflict and rising global shipping costs, while imports surged on stronger domestic demand, particularly for semiconductors and server-related equipment from South Korea.
Overall, the data suggested underlying resilience in China’s domestic economy, raising expectations that stronger import activity and price pressures could help boost inflation.
Elsewhere in Asia, currencies generally strengthened. The Singapore dollar held steady after weaker-than-expected economic growth, even as the Monetary Authority of Singapore tightened policy by adjusting the upper range of its exchange rate band.
The Japanese yen also appreciated, with USD/JPY falling 0.3%, after Finance Minister Satsuki Katayama urged caution in commenting on the Bank of Japan’s policies. Meanwhile, the South Korean won edged up 0.1%, and the Australian dollar gained 0.2%.
Sources: Ambar Warrick
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