Concerns over the Iran situation make Asian foreign exchange markets cautious; the Australian dollar rises ahead of the RBA decision.

Investing.com - On Tuesday, most Asian currencies remained within narrow ranges as the market stayed cautious amid oil price rebounds driven by ongoing US-Israel tensions with Iran.

The Australian dollar rose slightly, outperforming regional peers, as markets prepared for a possible rate hike by the Reserve Bank of Australia later.

Aside from the RBA, focus this week also centers on several major central bank meetings, with the Federal Reserve set to decide on interest rates on Wednesday.

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The US dollar index and dollar futures edged higher during Asian trading hours after retreating from nearly 10-month highs in the previous session.

Australian dollar rises as RBA rate hike becomes focus

The AUD/USD currency pair increased by 0.2%, slightly outperforming regional peers.

Market attention is fully on the upcoming RBA meeting, widely expected to raise rates by 25 basis points to 4.10%.

A series of hawkish signals from the RBA in recent weeks have boosted rate hike expectations, as the central bank tries to address rising inflation toward the end of 2025.

Analysts suggest the RBA may hike rates early to counter energy-driven inflation sparked by the Iran conflict. Besides March, the RBA is also expected to raise rates again in May.

Yen rebounds from 19-month lows amid intervention concerns

The USD/JPY currency pair rose by 0.2%, but trading remains well below the nearly 19-month high reached last week.

Finance Minister Shunichi Suzuki said last week that Tokyo is prepared to act swiftly against sharp forex market fluctuations, keeping traders alert to potential intervention.

The Bank of Japan will also hold a meeting this week, with widespread expectations to keep rates unchanged while issuing hawkish outlooks on policy prospects.

BOJ Governor Kazuo Ueda stated on Tuesday that core inflation is accelerating toward the BOJ’s 2% annual target.

Asian forex markets hesitant amid unresolved Iran conflict

On Tuesday, broader Asian currencies remained within narrow ranges, with risk aversion driven by Iran tensions showing little sign of easing.

The USD/CNY pair declined by 0.2%, supported by a stronger midpoint set by the People’s Bank of China compared to peers.

The USD/SGD pair rose by 0.1%, after data showed that Singapore’s key non-oil exports in February grew less than expected.

The USD/KRW rose by 0.2%, while the TWD/USD declined by 0.2%.

The INR/USD increased by 0.1% to 92.321 rupees, but remains below recent record highs amid signs of intervention by the Reserve Bank of India.

Like most Asian currencies, the rupee has been hit by soaring oil prices, with markets worried this could disrupt regional economies. Many Asian countries are net oil importers, highly vulnerable to Middle Eastern supply disruptions.

The conflict shows little sign of cooling, with Iran largely continuing to block the Strait of Hormuz in retaliation for US and Israeli strikes. Tehran has also launched attacks on assets in Israel and the US across several Middle Eastern countries.

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