Asian Currencies Hold Steady Amid Iran Conflict and Fed Uncertainty

Asian currencies traded within a narrow range on Monday as ongoing tensions from the U.S.-Israel military campaign against Iran and anticipation ahead of a key U.S. Federal Reserve policy meeting kept the dollar hovering near 10-month highs. Investors remained cautious as geopolitical risks continued to weigh on global markets, keeping energy prices elevated and stoking fears of inflation driven by oil supply disruptions.

Among the region's currencies, the Australian dollar stood out as a top performer, climbing 0.4% against the greenback. The rally was fueled by growing market expectations that the Reserve Bank of Australia will raise interest rates by 25 basis points to 4.10% following its two-day policy meeting on Tuesday. The RBA's last rate hike came in December, and central bank officials have since flagged rising inflationary pressures linked to energy market instability stemming from the Iran conflict.

The Chinese yuan saw minimal movement, edging up just 0.1% after stronger-than-expected economic data. China's industrial production and retail sales for January and February 2026 beat forecasts, supported by solid export demand and a pickup in consumer spending during the Lunar New Year period. Fixed asset investment also returned to growth for the first time since August 2025, signaling renewed business confidence, particularly within the artificial intelligence sector. However, an unexpected rise in China's unemployment rate tempered optimism about the broader economy.

Elsewhere across Asia, the Japanese yen slipped 0.1%, the Singapore dollar held flat, the Indian rupee rose 0.1% touching a record high of 92.711 against the dollar, and the South Korean won gained 0.3%. The dollar index steadied after reaching its highest level in ten months on Friday, bolstered by safe-haven demand. The Fed is widely expected to hold interest rates steady this week amid persistent economic uncertainty and reduced expectations for near-term rate cuts.