Asian currencies steady as Hormuz reopening hopes keep Brent near $79

Asian currencies consolidated against the dollar in early trade Wednesday as markets adopted a wait-and-see stance on a possible reopening of the Strait of Hormuz, the chokepoint that carries about 21 percent of global oil trade.

"Higher inflation is largely driven by food and fuel, while core inflation remains benign," Sanjay Malhotra, governor of the Reserve Bank of India, said after the central bank held its repo rate at 5.25 percent and trimmed its FY27 inflation forecast to 5 percent from 5.1 percent.

Brent crude fell 0.1 percent to $79.45 a barrel, down sharply from a peak of $102 during the five-month-old conflict, while the Indian rupee strengthened to 95.13 per dollar, its strongest in a month. President Donald Trump said a deal to reopen the Strait of Hormuz could come as early as Wednesday, though talks have seen repeated stops and starts.

India imports nearly 90 percent of its crude requirements, making the chokepoint's status a direct driver of its trade balance and currency. A sustained reopening would ease import costs and support Asian currencies, while a renewed closure risks pushing Brent to $130-$135 a barrel, according to CareEdge Ratings.

Rupee's One-Month High Rests on Oil Slide

The rupee's climb to 95.13 per dollar came as falling oil prices eased inflation expectations and drew foreign inflows back into Indian equities and bonds. The RBI's decision to hold rates and cut its inflation forecast reinforced the currency's momentum, with traders noting state-run banks sold dollars to cement the gains. The last time oil fell this sharply on diplomatic hopes, in late July, Brent dropped more than 9 percent in a single session to below $90 a barrel after the U.S. paused strikes on Iran, lifting Indian government bonds and pushing the rupee past 95.

The currency's gains have been capped by importer hedging and dollar demand from state banks, keeping the pair wedged between support at 94.75 and resistance near 95.60. A firmer dollar index ahead of the Federal Reserve's policy decision has also limited upside, with markets pricing at least one rate increase before the end of 2026. Across the region, the yen found footing after intervention, while the dollar index hovered near six-week lows on Middle East peace hopes.

What a Reopening Means for Asia

Goldman Sachs sees Brent trading between $80 and $90 a barrel until clarity emerges on U.S.-Iran nuclear talks, with physical markets tightening on reduced flows from key regions. Gulf oil exports have dropped substantially from pre-war levels, and Russian crude supplies have also declined, limiting the buffer against renewed disruption. U.S. crude inventories rose 2.5 million barrels last week as refinery runs eased, while gasoline stockpiles fell 1.6 million barrels.

For oil-importing Asian economies, the stakes are direct. Saudi Aramco's second-quarter net profit jumped 44 percent year-on-year as higher prices offset lower volumes, showing how the conflict has redistributed wealth from importers to producers. A reopening that holds would reverse part of that transfer, easing fuel costs for consumers and reducing pressure on central banks to tighten policy. Treasury yields have already responded, with the 10-year slipping to 4.61 percent as oil's retreat cooled inflation expectations, while South Korea's July inflation eased to a three-month low on softer energy prices.

This article is for informational purposes only and does not constitute investment advice.