In the Asian session on Tuesday, most Asian currencies fell as the market weighed fluctuating oil prices, uncertain trade policies, and U.S. political risks. The U.S. dollar index rebounded by about 0.1% after a slight decline in the previous trading day; U.S. dollar index futures also rose slightly (as of GMT 03:36).
Rising Oil Prices and Tariff Statements Amplify Regional Pressure
One of the core factors driving sentiment to weaken is energy prices. The market is worried that domestic turmoil in Iran might disrupt supply, keeping oil prices relatively strong. Meanwhile, Trump stated that a 25% tariff would be imposed on goods from countries doing business with Iran, though no specifics on the scope and timeline were provided, further pressuring risk appetite.
MUFG mentioned in a report that the recent rise in oil prices could be a drag on Asian currencies, specifically naming Turkey, the UAE, and to some extent Russia, India, and Iran as being trade-linked outside of China. This uncertainty easily spreads to the foreign exchange market through energy and trade channels.
Yen Leads Decline, Korean Won Continues Weakening Trend
In the market, the yen is among the weakest performers: USD/JPY rose to around 158.76, marking its highest level since January 2025 (corresponding to a one-year low for the yen). The Korean won also remained under pressure, with USD/KRW up about 0.4%, continuing its upward trend of several days.
Regarding other currencies, USD/INR rose slightly, and the Singapore dollar was largely flat; the onshore yuan had limited fluctuations, while the offshore yuan was slightly weaker; the Australian dollar essentially moved sideways.
Fed Independence Returns to the Spotlight, Market Shifts to 'Wait-and-See' Mode
Apart from geopolitical and trade clues, discussions around Fed independence are also heating up. Reports indicate that the Trump administration has launched a criminal investigation into testimony related to Jerome Powell and the Fed's headquarters renovation project, prompting additional concerns about the policy environment; Powell emphasized that decision-making would continue to be driven by economic data and the Fed's mission. ING pointed out that the current market appears to be in a wait-and-see mode, assessing the actual impact of these events.
Against this backdrop, even though the dollar previously weakened temporarily, Asian currencies have struggled to find sustained support; traders will next focus more on the upcoming U.S. economic data and Fed statements to recalibrate interest rate expectations.
