Asian Currencies Steady as Markets Await Clarity on U.S.-Brokered Iran-Israel Ceasefire

Asian currencies were largely stable on Wednesday as traders watched for signs of whether a fragile U.S.-brokered ceasefire between Israel and Iran would hold. The U.S. dollar also remained rangebound amid mixed signals on interest rates from the Federal Reserve.

The Australian dollar (AUDUSD) was flat despite weaker-than-expected CPI data for May, which reinforced expectations of further interest rate cuts by the Reserve Bank of Australia (RBA). Headline inflation dropped to a seven-month low, while trimmed mean inflation hit its lowest level in over three years. The data followed soft Australian employment figures last week, suggesting a cooling economy and giving the RBA more leeway to ease monetary policy. The RBA has already cut rates by 50 basis points in 2025.

Regional currencies showed limited movement. The Japanese yen (USDJPY) edged 0.1% lower, the Chinese yuan (USDCNY) was flat, while the South Korean won (USDKRW) slipped 0.3%. The Singapore dollar (USDSGD) and Indian rupee (USDINR) also traded sideways.

The U.S. dollar index dipped slightly in Asian trade, retracing earlier gains driven by geopolitical tensions. Although safe-haven demand surged after U.S. strikes on Iran, sentiment reversed following President Donald Trump’s ceasefire announcement. Despite initial violations, airstrikes from both sides had subsided by Wednesday.

Investor focus now turns to the durability of the ceasefire and the Federal Reserve’s next move. While CME FedWatch shows some market bets on a July rate cut, Fed Chair Jerome Powell downplayed imminent easing in his testimony to Congress, citing inflation risks linked to Trump’s trade tariffs. Meanwhile, Trump reiterated his criticism of the Fed, calling for rates to be two to three points lower.