Most Asian currencies continued to decline on Wednesday as investors grappled with the escalating conflict in the Middle East, a sharp rise in oil prices, and a stronger US dollar.
The USD Index closed 0.6% higher overnight and gained 0.1% in Asian trade amid the widening conflict between the US, Israel, and Iran.
USD Index futures were up 0.2% as of 8:24 AM Moscow time.
Traders Assess the Impact of the Oil Price Surge
The geopolitical crisis triggered by coordinated US and Israeli strikes on Iran over the weekend, followed by Iranian retaliation, has threatened key energy flows through the Strait of Hormuz, raising fears of prolonged supply disruptions. Brent crude oil prices have risen sharply on these risks, jumping 14% since last Friday.
The surge in oil prices has heightened concerns about rising inflation globally and dampened expectations of an imminent rate cut by the Federal Reserve.
"Asian currencies are increasingly coming under the cross-current of higher oil prices, a stronger US dollar, and deteriorating risk sentiment," an ING analyst wrote in a note.
Indian rupee hits record low
The Indian rupee fell to record lows, with the USD/INR pair rising 0.3% to 92.325 rupees, weighed by rising crude import costs and capital outflows.