Asian currencies steadied on Thursday after posting strong gains in the previous session. Market sentiment was driven by news of peace talks between the United States and Iran, which has sent crude oil prices plunging more than 7%, easing inflationary pressures in the region.
The fall in oil prices has provided a major relief to energy-importing Asian countries, which have been struggling with trade deficits due to the crisis in the Strait of Hormuz. This has also dampened demand for the US dollar as a safe-haven asset, giving regional currencies room to strengthen.
However, the South Korean won eased slightly on Thursday after surging sharply yesterday, while the Chinese yuan and Japanese yen remained range-bound. Investors are now taking a cautious stance as they await official confirmation of the peace deal.
In Australia, the local dollar was hit by March trade data that showed a surprise deficit of A$1.84 billion. The weak performance was due to weak commodity exports and rising import costs, which contradicted analysts' expectations for a trade surplus.
The Bank of Japan has signaled the possibility of a rate hike if inflationary pressures from energy costs continue to build. Investors will now focus on the US non-farm payrolls (NFP) report due on Friday to determine the Federal Reserve's next monetary policy stance.
