The dollar strengthened Wednesday amid Gulf tensions and Houthi shipping attacks, as markets await U.S. inflation data to gauge Federal Reserve policy direction, with investors anticipating rate decisions based on upcoming economic indicators.
Investors are increasingly diversifying into Chinese assets, as the country's bonds and yuan have delivered steady returns during global market turbulence, decoupled from AI trends and U.S. rate sensitivity, attracting significant foreign capital inflows.
Indonesian markets plummeted as the rupiah breached 18,000 per dollar and stocks hit six-year lows, driven by policy uncertainty under President Prabowo, elevated oil prices, and investor concerns about state intervention and potential credit rating downgrades.
Iran war turmoil depletes Asian foreign-exchange reserves, with Philippines and India hit hardest.
Chinese stocks achieved their fifth consecutive weekly gain despite escalating US-Iran tensions, with the Shanghai Composite rising 1.65 percent, as investors await next week's Beijing-Washington meeting for economic policy direction.
Asian currencies hit record lows due to rising oil prices and inflation concerns.
Indonesia's rupiah fell 0.8% to a seven-month low amid surging oil prices, declining 2% in April as fiscal pressures from fuel subsidies and spending plans under President Prabowo weaken investor sentiment and currency stability.
Oil prices surged over two percent as US-Iran military escalation intensified, exacerbating Asian market losses already pressured by semiconductor stock declines and strengthening dollar conditions.
China's decoupling from global markets amid geopolitical turmoil and AI volatility attracted foreign investors seeking diversification, with bond inflows returning and foreign stock holdings rising to over four trillion yuan since year-end.
Iran's late-February conflict triggered a 40% crude price surge, weakening Asian currencies like India's rupee toward 100 per dollar and Philippine peso toward 65, while bond yields climbed sharply, pressuring oil-importing economies reliant on foreign capital and forcing central banks to tighten policy.
Asian central banks rapidly depleted foreign-exchange reserves to stabilize currencies amid Middle East conflict-driven oil price surges, with the Philippines, India, and Indonesia recording significant declines reducing their economic resilience and growth prospects.
China stocks notch fifth weekly gain despite renewed US-Iran hostilities
Thailand's central bank will likely hold its key rate at 1% to shield the economy from the global oil shock.
Bank Indonesia held its benchmark interest rate at 4.75% for the seventh consecutive meeting, vowing intensified foreign exchange intervention to stabilize the rupiah amid Middle East conflict pressures and capital outflows threatening Southeast Asia's largest economy.
Analysis-China breaks step with global markets, and investors buy in
China and Hong Kong stocks rose Monday as a tentative US-Iran peace deal eased energy concerns, with CSI300 gaining 1.5% and Hang Seng up 0.5%, while chipmakers and AI stocks led regional gains.
India's foreign exchange reserves fell 5.2 percent to $691 billion amid the US-Iran conflict, as rising oil prices forced Asian central banks to intervene in currency markets to stabilize their economies.
Japan's 20-year government bond yield climbed to its highest level since 1997, reaching 3.495% as elevated energy prices intensify inflation pressures, with broader market implications for regional and global bond markets amid currency volatility.
Chinese and Hong Kong stocks declined Friday as US-Iran hostilities threatened their ceasefire, with Shanghai Composite falling 0.43% and Hang Seng dropping 1.09%, while investors awaited next week's US-China leadership meeting.
G7 central banks are preparing for potential inflation surges from geopolitical conflicts disrupting oil supplies, with major policymakers convening simultaneously to set rates while markets scrutinize their forward guidance on inflation risks and potential tightening measures.