Asian Currencies Weaken as Yen Slides to One-Year Low Amid Oil Price Surge and U.S. Political Risks

Most Asian currencies declined on Tuesday, led by a sharp fall in the Japanese yen, as rising oil prices linked to unrest in Iran and renewed U.S. political and trade uncertainty dampened investor sentiment across the region. Currency markets struggled to find direction even as the U.S. dollar showed only modest strength, highlighting the broader risk-off mood in global markets.

The U.S. Dollar Index, which tracks the greenback against a basket of major currencies, edged up 0.1% after a slight dip in the previous session. Dollar index futures also traded marginally higher, signaling cautious optimism toward the dollar despite lingering political concerns in Washington.

Investor confidence was further shaken after U.S. President Donald Trump announced plans to impose a 25% tariff on goods from countries doing business with Iran. Although details on the timing and scope of the tariffs were not provided, the statement added to trade uncertainty and pressured emerging market and Asian currencies. At the same time, oil prices continued to climb following deadly anti-government protests in Iran, raising fears of supply disruptions and potential military escalation. Higher oil prices are particularly negative for many Asian economies that rely heavily on energy imports.

Analysts noted that rising oil prices, combined with geopolitical tensions in Iran and Venezuela, have weighed on regional currencies. Countries with trade exposure to Iran, including parts of Asia, have been especially sensitive to these developments.

The Japanese yen was the worst performer, with the USD/JPY pair rising around 0.4% to near 158.8, marking its weakest level in about a year. The South Korean won also extended its losing streak, while the Indian rupee posted modest losses. The Singapore dollar and Australian dollar were largely stable, and China’s yuan showed minimal movement both onshore and offshore.

Adding to market unease, the Trump administration’s move to open a criminal investigation into Federal Reserve Chair Jerome Powell raised concerns over central bank independence. Although Powell defended the Fed’s autonomy, investors remain cautious. Overall, Asian currencies struggled as markets weighed U.S. political risk, trade tensions, and elevated oil prices, with attention now shifting to upcoming U.S. economic data and signals from the Federal Reserve.