The US-Iran ceasefire boosts Asian currency markets; New Zealand Reserve Bank keeps interest rates unchanged, India Central Bank decision imminent

Investing.com— Wednesday, most Asian currencies strengthen, supported by a softer U.S. dollar and improving risk sentiment, after U.S. President Donald Trump agreed to a temporary ceasefire deal with Iran, while the Reserve Bank of New Zealand kept interest rates unchanged as expected.

The focus in Asian markets also shifts to the Reserve Bank of India, which will release its policy decision later on Wednesday evening.

The U.S. Dollar Index falls by nearly 1%, to a four-week low. As of 23:28 U.S. Eastern Time (03:28 Beijing time), U.S. Dollar Index futures also drop 0.9%.

Trump announces ceasefire with Iran; the yuan rises to a three-year high

Late Tuesday, Trump said he had agreed to a two-week “bilateral” ceasefire agreement with Iran, just a few hours before his own self-imposed deadline, which calls for the United States to launch a large-scale attack if Tehran fails to reopen the Strait of Hormuz.

The ceasefire was brokered through last-minute efforts led by Pakistan, aimed at creating a narrow window for negotiations toward a broader peace agreement.

The conditions of the ceasefire are that Iran ensures the Strait of Hormuz is “fully, immediately, and safely” reopened.

In early trading on Wednesday, oil prices plunged to below $100 per barrel.

“These negotiations and stepping back from the brink are undoubtedly a positive signal, including for Asia, where the region has been and will continue to suffer disproportionately from the closure of the Strait of Hormuz,” Mitsubishi UFJ Financial Group analysts said in a report.

Onshore Chinese yuan against the U.S. dollar rises to a three-year high; the USD/CNY pair falls 0.5% to 6.82 yuan—its lowest level since March 2023.

The USD/JPY pair for the Japanese yen falls 0.8%, while the USD/KRW pair for the South Korean won crashes 1.4%.

The USD/SGD pair for the Singapore dollar falls 0.6%.

New Zealand’s central bank keeps the rate at 2.25%; the Reserve Bank of India decision is due

The NZD/USD currency pair jumps 1.7%, gaining further support after the Reserve Bank of New Zealand maintained the official cash rate at 2.25% unchanged, in line with expectations.

The central bank warned that oil-price increases related to conflict in the Middle East could boost inflation in the short term, even though economic activity is slowing.

In addition, the AUD/USD currency pair climbs 1.2%.

Ahead of the Reserve Bank of India’s decision, India’s rupee’s USD/INR pair falls 0.5% to a three-week low.

The Reserve Bank of India is widely expected to keep the benchmark repo rate at 5.25% unchanged, after continuing to stay on hold following its last action in February, as policymakers assess the impact of oil-price volatility and global uncertainty on the domestic economy.

Market participants are also turning their focus to the U.S. consumer price index report scheduled to be released on Friday, which is expected to provide further direction for the outlook on the dollar and global monetary policy.

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