Trump hints at withdrawing from Iran conflict, Asian forex maintains gains; China's PMI shows cost pressures

Investing.com- On Wednesday, most Asian currencies held steady after posting strong gains overnight, while the U.S. dollar weakened, as signs that the Middle East conflict could be downgraded improved risk sentiment.

The U.S. Dollar Index fell 0.1% during Asian trading hours after closing down 0.6% overnight.

As of 23:52 (Eastern Time) / 03:52 (Beijing Time), U.S. Dollar Index futures were also down 0.1%.

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Trump says the Iran war could end soon; Strait of Hormuz risk still exists

Investors reacted to remarks by U.S. President Trump, who said Washington could end its military action against Iran within “two to three weeks,” sparking hopes for a near-term resolution.

Improved sentiment helped risk assets bounce back, with Asian stock markets rising sharply on Wednesday.

However, investors remained cautious, as the Wall Street Journal reported that even if the Strait of Hormuz is kept largely closed, Trump is still willing to end U.S. military operations, highlighting ongoing risks to global trade and energy supplies.

A Mitsubishi UFJ Financial Group analyst said that despite recent diplomatic signals, the outlook for a lasting peace agreement between the U.S. and Iran remains uncertain.

They pointed to the sticking points, including Iran’s internal power structure, the strategic leverage of the Strait of Hormuz, and broader regional tensions, and warned that even if the U.S. withdraws its troops, it may leave behind an “extremely unstable balance.”

The Japanese yen versus the U.S. dollar USD/JPY pair was roughly unchanged after falling 0.6% in the prior trading day.

The South Korean won versus the U.S. dollar USDKRW pair rose 0.2% on Wednesday after falling 0.7% overnight.

The Indian rupee versus the U.S. dollar USD/INR pair rose 0.2% to 93.68 rupees after dropping 1% on Tuesday. The currency touched a historical low of 95.22 rupees in the prior trading day.

China factory activity expands, but input costs surge

Economic data from China also underscored potential pressure in the region.

Caixin’s manufacturing PMI showed factory activity expanded for the fourth consecutive month in March, but growth slowed and missed expectations, highlighting a cooling momentum.

The survey pointed to a sharp rise in input costs, partly due to higher oil prices tied to the Middle East conflict, with manufacturers facing the fastest input price growth since March 2022.

The onshore yuan USD/CNY was roughly flat, while the offshore yuan USD/CNH fell 0.2%.

In addition, the Singapore dollar versus the U.S. dollar USD/SGD pair was unchanged.

The Australian dollar versus the U.S. dollar AUD/USD rose 0.2% on Wednesday.

Investors are now looking ahead to upcoming U.S. economic data, including the non-farm payrolls report later this week, to gain further insight into the direction of monetary policy and the foreign-exchange market.

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