Asian currencies are consolidating against the dollar, but may face headwinds from rising oil prices that could lead to further Federal Reserve rate increases, enhancing the appeal of U.S. fixed-income assets. “The U.S. and Iran remained far apart on a deal, with Iranian officials reportedly pessimistic about reaching an agreement before U.S. midterm elections in November,” CBA’s Carol Kong says in a research report. “The prolonged closure of the Strait of Hormuz threatens to sustain elevated energy prices, adding to inflation pressures and reinforcing the case for further Fed tightening,” the economist and currency strategist adds. The dollar is little changed at 157.35 yen and is 0.1% lower at 1,358.27 won, LSEG data show.

The geopolitical tensions surrounding Iran and the potential disruption of oil supply through the Strait of Hormuz continue to influence market sentiment. Traders are closely watching for any signs of escalation that could further impact energy prices and inflation expectations. The Fed's stance on monetary policy remains a key focus, with any indication of sustained inflation likely to support the dollar against Asian currencies.