Asian currencies strengthen amid risk-on sentiment - WSJ

Asian currencies strengthen amid risk-on sentiment - WSJ

Asian Currencies Strengthen Amid Risk-On Sentiment Amid Geopolitical Easing

Asian currencies have shown resilience in recent trading sessions, supported by improving risk sentiment linked to de-escalating tensions in the Middle East and accommodative monetary policies across the region. The potential for a U.S.-Iran nuclear deal has eased geopolitical concerns, fostering a modest shift toward risk-on positioning and stabilizing regional currencies. However, reduced liquidity during Lunar New Year holidays has limited pronounced movements, with most currency pairs trading within narrow ranges.

Key indicators highlight this cautious optimism. The USD/JPY pair edged up 0.2% to 153.60, reflecting sustained dollar demand despite the softer geopolitical backdrop, while the USD/KRW remained relatively unchanged at 1,444.67, underscoring subdued trading volumes. In contrast, the AUD/USD dipped 0.2% to 0.7070, signaling that global risk appetite remains insufficient to drive sustained buying in pro-cyclical currencies.

The broader trend aligns with a shift toward supportive monetary and fiscal policies in Asia, aimed at bolstering domestic growth amid external uncertainties. Central banks in China, India, and Southeast Asia have resumed easing cycles, with forward guidance pointing to further rate cuts to stimulate economic activity. These measures, combined with fiscal stimulus packages, are expected to cushion Asian economies against potential U.S. economic slowdowns and trade-related headwinds.

However, the immediate outlook remains constrained by holiday-thinned liquidity, which dampens the transmission of geopolitical improvements into currency strength. Analysts caution that diplomatic progress must translate into concrete follow-through to sustain the current momentum. For now, Asian currencies are likely to remain range-bound until normal trading volumes resume and geopolitical developments gain clearer traction.

Investors are advised to monitor both diplomatic developments and central bank policies, as either could swiftly alter the current equilibrium. While the risk-on environment offers near-term support, prolonged uncertainties—particularly in trade negotiations remain a key challenge for regional markets.

Asian FX Holds Steady as Thinner Liquidity Meets Easing Middle East Tensions
Navigating Shifts: Asian Sentiment in the Face of Uncertainties