Asian foreign exchange markets are watching Iran's diplomatic developments, with the Indian Rupee hitting a record low.

Investing.com - On Friday, most Asian currencies were nearly flat, while the dollar remained strong as investors cautiously assessed efforts to ease tensions in the Middle East and their impact on oil prices.

The dollar index fell 0.1% during the Asian trading session, having risen for three consecutive days. As of 00:26 Eastern Time (04:26 GMT), dollar index futures also fell 0.1%.

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Trump Halts Attacks on Iranian Energy Infrastructure

U.S. President Donald Trump stated on Thursday that at Tehran’s request, he would pause attacks on Iranian energy infrastructure for 10 days, adding that negotiations with Tehran were “progressing very smoothly.”

This statement helped calm global markets, which had experienced heightened volatility in recent weeks due to the conflict between the U.S.-Israel and Iran, although traders remained wary of a sudden reversal.

Analysts at Mitsubishi UFJ Financial Group (MUFG) stated in a report, “Our baseline expectation remains that the U.S.-Iran conflict will be relatively short-lived, and the geopolitical risk premium will eventually fade. However, the risk leans toward a more prolonged conflict, which would keep energy prices elevated for a longer period.”

They added, “In the Asian forex market, currencies with the highest dependence on energy imports remain the most vulnerable to further escalation of tensions in the Middle East, most notably the Korean won and the Japanese yen.”

The USD/JPY currency pair fell 0.1%, while the USD/KRW was nearly flat.

The onshore Chinese yuan (USD/CNY) rose 0.1%, while the Singapore dollar (USD/SGD) traded unchanged.

Indian Rupee Hits All-Time Low

The Indian rupee (USD/INR) fell 0.1% to 94.174 rupees, having previously touched an all-time high of 94.301 rupees earlier in the day.

Additionally, the Australian dollar (AUD/USD) rose 0.2%.

The dollar continued to gain support as the market sustained expectations that U.S. interest rates would remain elevated for a longer period, especially after a spike in oil prices earlier this month raised inflation concerns.

During the peak of tensions in the Middle East, crude oil prices briefly soared to around $120 per barrel, triggering worries about energy-driven inflation shocks.

Analysts at Mitsubishi UFJ Financial Group added, “Against the backdrop of increasing geopolitical uncertainty and risk aversion in the stock market, the ‘maintaining high levels for a longer time’ U.S. interest rates continue to support the dollar while putting Asian currencies on the defensive.”

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