OCBC strategists Christopher Wong and Sim Moh Siong report that Asian foreign exchange markets, including the South Korean Won (KRW), have traded slightly firmer overnight, driven by hopes of de-escalation in the Middle East. However, they emphasize that geopolitics remains the dominant factor influencing market movements, with particular attention on the situation surrounding the Strait of Hormuz [1].
The strategists note that any further relief rally in Asian FX will depend on concrete details regarding a potential deal on the reopening of the Strait of Hormuz and whether Iran secures guarantees. They state, 'What markets probably need is clarity on the timeline of reopening the Strait of Hormuz and if Iran secures guarantees. If we do get these details in order, then there is a good chance high-beta currencies, including KRW should take the lead in recovery' [1].
While a further relief rally is possible if de-escalation prevails, the extent of such a rally will depend on whether the deal involves a temporary ceasefire or more permanent measures. Until these details emerge, Wong expects most Asian FX to trade sideways, reflecting ongoing uncertainty and the lack of concrete information about the situation [1].
President Trump's threat of escalation acts as a counterweight to hopes of de-escalation, contributing to the cautious tone in Asian FX markets. The strategists conclude that, in the absence of clarity, the current sideways trading pattern is likely to persist [1].
CONCLUSION
Asian FX markets are currently trading sideways, with slight firmness observed on hopes of Middle East de-escalation. However, the lack of concrete details regarding the Strait of Hormuz keeps market participants cautious, and further relief rallies will depend on the emergence of clear information. Geopolitical developments remain the key driver for Asian FX in the near term.