Asian Currencies Mixed: Ringgit and Rupiah Weaken, Won Holds Firm

Jakarta, CNBC Indonesia - Most Asian currencies weakened against the US dollar on Wednesday morning trade, pressured by a greenback that held firm after sharp gains in the previous session. According to Refinitiv data, seven currencies faced pressure from the dollar, while three managed to strengthen as of 09:15 Western Indonesia Time. The Indonesian rupiah fell 0.17% to Rp17,910/US, slippingbacktotheRp17, 900levelafterclosingstrongeratRp17, 880/US on Tuesday. The Thai baht led losses in the region, weakening 0.21% to THB 33.75/US, followedbytheMalaysianringgitwhichfell0.15. The Vietnamese dong also corrected 0.08% to VND 26,331/US, whiletheChineseyuanweakened0.07. The Philippine peso fell 0.06% to PHP 61.761/US, andtheSingaporedollaredgeddown0.01. In contrast, the South Korean won and Taiwan dollar posted the sharpest gains in Asia, both strengthening 0.10% against the US dollar. The won traded at KRW 1,479.9/US, whiletheTaiwandollarstoodatTWD32.294/US. The Japanese yen also managed a slight 0.01% gain to JPY 163.15/US$, though it remains in a very weak position against the dollar. The mixed performance came amid developments in the Middle East conflict and its impact on the US Dollar Index (DXY). The index, which measures the greenback against six major currencies, was stable at 101.174 on Wednesday morning. However, it had gained 0.22% on Tuesday to breach the 101 level, limiting the upside for Asian currencies. Sentiment was driven by renewed attacks in the Middle East, which pushed oil prices higher and sparked concerns about prolonged inflation. Tensions escalated further after two tankers carrying Saudi crude to Asia reportedly turned back in the Red Sea following threats from Iran-affiliated Houthi militants in Yemen. The widening conflict is disrupting shipping through critical global energy chokepoints. Meanwhile, the US military confirmed it had completed the latest round of strikes on Iran on Monday, marking the tenth consecutive night of operations. Oil prices rose in response, with US crude gaining 2.09% to US$84.97 per barrel and Brent strengthening 1.88% to US$90.90 per barrel after touching US$91.99, its highest since 11 June. The rise in oil prices has refocused market attention on inflation risks. Optimism over a potential US-Iran peace deal had previously eased price pressures and expectations of Federal Reserve rate hikes, but the renewed regional tensions have reversed that trend. Comments from Fed officials, including Chair Kevin Warsh, continue to signal concern over inflationary pressures. Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull in Toronto, said markets are now rationally pricing in the ongoing escalation. He noted that the Fed’s stance remains hawkish, and the longer the Middle East conflict persists, the greater the risk that the central bank will sound even more hawkish. Despite the high tensions, diplomatic efforts have not completely halted. A senior Iranian official told Reuters on Monday that Tehran had accepted a 10-day ceasefire proposal from mediators. However, US President Donald Trump stated there would be a response if Yemen’s Houthi group carried out its threat to blockade commercial shipping in the Red Sea. On the interest rate front, market expectations for a Fed rate hike have risen again. According to the CME FedWatch tool, the probability of a minimum 25-basis-point hike at next week’s meeting increased to 21.9%, up from around 11% a week earlier. For the September meeting, markets are pricing in a 68.2% chance of a rate increase.