Most Asian currencies came under pressure during today’s trading as the US dollar remained strong supported by investor preference for safe haven assets amid uncertainty over the future of negotiations between Washington and Tehran along with fading expectations for US interest rate cuts which pushed liquidity toward the greenback at the expense of risk sensitive currencies.
The dollar extended its upward movement reaching its highest levels since April 10 supported by rising tensions in the Middle East as disagreements persist over the Strait of Hormuz and the US naval blockade on Iran while the extension of the ceasefire has failed to ease tensions effectively.
Expectations of continued tight monetary policy also supported the US dollar especially as markets increasingly believe that the Federal Reserve will not move toward cutting rates in the near term This view was reinforced by Kevin Warsh the nominee for Fed Chair who signaled a less dovish stance while emphasizing central bank independence and supporting balance sheet reduction Market estimates suggest that any rate cut may be delayed for several months.
Asian stock markets during Thursday trading lost early gains after a positive start as volatility dominated trading and renewed tensions between Washington and Tehran imposed caution among investors despite strong performance in technology stocks.
Markets had opened higher following gains on Wall Street where both the S and P 500 and Nasdaq closed at record highs supported by the decision to extend the ceasefire However optimism quickly faded as concerns over global oil supply resurfaced particularly amid recent developments in the Strait of Hormuz.
Japan Nikkei index retreated after hitting a record high earlier in the session while South Korea Kospi index also edged lower after reaching record levels supported by technology stocks led by semiconductor companies.
Strong earnings from SK Hynix which recorded a sharp rise in operating profit driven by demand for artificial intelligence chips were among the key supportive factors along with improved economic growth data from South Korea which showed stronger than expected performance in the first quarter Nevertheless these factors were not enough to sustain the upward momentum amid external pressures.
Meanwhile geopolitical tensions continued to weigh on sentiment with oil prices holding above 100 dollars per barrel due to supply disruptions through the Strait of Hormuz particularly after the seizure of commercial vessels in the region highlighting the fragile nature of the ceasefire despite its extension.
Chinese and Hong Kong markets faced similar pressure with major indices declining while Australian and Singapore markets also recorded notable losses US stock futures pointed lower during Asian trading reflecting ongoing caution in global markets.
Asian currencies continued to move lower overall with the Japanese yen showing relative resilience supported by expectations that the Bank of Japan will keep rates unchanged at the upcoming meeting while possibly signaling future rate hikes amid inflation pressures linked to higher energy prices Improved manufacturing activity data also provided partial support to the yen.
Other regional currencies lacked sufficient support with the South Korean won weakening despite strong growth data driven by semiconductor exports while other sectors especially private consumption remained soft The Singapore dollar and Chinese yuan moved within limited ranges while the Indian rupee continued to decline after the central bank eased measures aimed at supporting the currency.
The Australian dollar faced mild pressure despite improved economic activity indicators suggesting that currency movements at present are more closely tied to global liquidity trends and prevailing market caution.
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