Asian Currencies Rise as Middle East Tensions Ease, South Korean Won Surges After Inflation Data

Asian currencies mostly strengthened on Wednesday as easing geopolitical tensions in the Middle East boosted investor confidence and weakened the U.S. dollar. Market sentiment improved after U.S. President Donald Trump announced a temporary pause in operations related to securing shipping routes through the Strait of Hormuz, reducing fears of a broader regional conflict.

The U.S. dollar index slipped 0.2%, while U.S. Dollar Index futures also moved lower during Asian trading hours. Investors shifted toward riskier assets as concerns surrounding disruptions in global oil supply began to fade.

Trump stated that the United States would temporarily halt “Project Freedom,” an operation aimed at restoring commercial shipping in the Strait of Hormuz, while negotiations with Tehran continue. Although the blockade remains in place, the announcement signaled possible diplomatic progress between Washington and Iran.

The easing tensions triggered a decline in oil prices after sharp gains earlier in the week. Lower crude prices are seen as positive for many Asian economies that rely heavily on energy imports, helping support regional currencies and easing inflation concerns.

China’s yuan gained ground, with the USD/CNY pair falling 0.2%, while the Japanese yen remained relatively stable against the dollar. The Indian rupee also strengthened as USD/INR declined 0.2%, and the Singapore dollar posted modest gains.

The South Korean won emerged as the top-performing Asian currency, with USD/KRW dropping 1.2% after inflation data exceeded expectations. South Korea’s consumer price index rose 2.6% year-over-year in April, accelerating from 2.2% in March and marking the fastest pace since mid-2024. Rising fuel and service costs contributed to the stronger inflation reading, increasing expectations that the Bank of Korea could maintain a hawkish monetary policy stance.

Meanwhile, China’s services sector showed resilience. The Caixin services PMI climbed to 52.6 in April, surpassing forecasts and indicating stronger business activity driven by stable domestic demand.

The Australian dollar also advanced sharply, with AUD/USD climbing 0.7% after the Reserve Bank of Australia delivered an interest rate hike, reinforcing expectations for tighter monetary policy ahead.