Asia FX Weekly Gains Hold Amid U.S. Inflation Data and Iran Ceasefire Uncertainty

Most Asian currencies slipped slightly on Friday but remained on track to close the week in positive territory, as traders adopted a cautious stance ahead of the U.S. March Consumer Price Index (CPI) release and monitored developments surrounding a fragile U.S.-Iran ceasefire agreement.

The U.S. Dollar Index ticked up 0.1% during Asian trading hours, though it was still heading toward a weekly loss of more than 1%, providing room for Asian currencies to advance. The week's broader optimism was fueled by hopes that a temporary two-week ceasefire between Washington and Tehran would hold, potentially stabilizing oil supply routes and easing geopolitical pressure across global markets.

However, investor sentiment remained cautious. Iran pushed back against reports of diplomatic talks in Islamabad, citing suspended negotiations due to Israeli military activity in Lebanon, casting doubt on the durability of the truce. Meanwhile, economists anticipated a modest monthly uptick in U.S. headline inflation for March, largely attributed to rising energy costs — a reading that could influence Federal Reserve policy expectations.

On the currency front, the Japanese yen edged marginally higher midweek but was set to finish the week down 0.2%, weighed down by domestic interest rate concerns. The South Korean won gained 0.4% on Friday but still faced a weekly decline of nearly 2%. The Chinese yuan remained largely range-bound, heading for a 0.8% weekly loss, even as China's factory-gate prices unexpectedly returned to growth. The country's Producer Price Index rose 0.5% year-on-year in March — its first expansion since September 2022 — driven by surging global energy costs. Consumer inflation, however, came in below forecasts, reflecting persistent disinflationary pressure in the domestic economy.

Elsewhere, the Indian rupee slipped 0.4%, the Singapore dollar gained 0.2%, and the Australian dollar dipped slightly but remained on course for a strong weekly rise of over 2.5%.