Asia FX firms as dollar weakens on Iran hopes; yuan flat after GDP

Most Asian currencies firmed as the dollar retreated after increasing hopes that the United States and Iran could hold more talks, easing safe-haven demand and supporting risk assets. The move left regional FX generally firmer, while the Chinese yuan was an exception, remaining broadly unchanged.

The dollar index and dollar futures each slipped roughly 0.1%, taking the greenback to its softest level in about six weeks. Softer producer inflation data and renewed speculation that the Federal Reserve may still deliver rate cuts later in the year put additional pressure on the currency. China’s first-quarter gross domestic product expanded 5.0%, topping consensus forecasts of 4.8%, yet USD/CNY hovered near 6.8 as the currency showed limited reaction to the stronger print.

Country-level moves were mixed: USD/JPY fell around 0.2%, USD/KRW eased about 0.3%, and USD/SGD and USD/INR were slightly lower. The Australian dollar outperformed, rising nearly 0.4% to reach levels not seen since June 2022, supported by resilient employment data that keeps the Reserve Bank of Australia’s tightening pathway in focus. These cross-currency shifts reflect an improved risk tone amid the evolving geopolitical picture.

In the broader context, hopes for progress in U.S.-Iran talks have eased some of the oil and shipping disruption premia that had supported safe-haven flows, even as oil prices remain elevated. The interplay between geopolitical developments and energy markets is critical for Asia’s export-dependent economies; any persistent supply disruptions could still weigh on growth despite recent stronger-than-expected data from China.

Looking ahead, market participants will watch diplomatic developments, upcoming U.S. inflation prints and central bank commentary for fresh cues. Analysts say near-term FX direction in Asia is likely to remain sensitive to headlines out of the Middle East, while macro releases from the U.S. and China will determine whether the dollar’s recent softening endures or reverses. For now, risk-sensitive currencies may retain the upper hand if geopolitical tensions continue to ease.