Wan says Asian currencies stayed resilient amid a softer dollar, as Middle East ceasefire tensions prompted caution
Asian currencies have remained steady alongside a weaker US Dollar, despite renewed tensions around a two-week ceasefire in the Middle East that is less than a day old.
Market sentiment has stayed relatively positive, with Asian exchange rates holding up so far even as the ceasefire shows early strains.
Asian Currencies Hold Firm
Physical oil flows through the Strait of Hormuz are still constrained. Ship traffic has improved in the number of vessels leaving the Strait, supported by tolls from Iran, the Oman route, and diplomatic talks.
Overall traffic levels remain low and are still focused more on ships and tankers departing than entering the Strait of Hormuz.
The note advises a cautious approach to risk and recommends hedging exposure to Asian emerging market currencies viewed as more vulnerable, including INR, PHP, THB, and KRW.
Hedging Strategy For Vulnerable Currencies
The article states it was produced with the help of an artificial intelligence tool and reviewed by an editor.
Despite a weaker dollar and stronger Asian currencies, we see a serious disconnect between buoyant financial markets and the physical reality in the Middle East. The two-week ceasefire appears extremely fragile, with recent reports of minor skirmishes already casting doubt on its survival. The core issue for us remains the constrained flow of oil through the Strait of Hormuz.
Maritime intelligence data shows tanker transits are still down nearly 40% from levels we saw in late 2025, a clear sign of underlying tension. This has been reflected in energy markets, where Brent crude volatility spiked to a three-month high of 45% just this week. These physical market indicators suggest the current calm in currency markets is temporary.
The recent strength in currencies like the Indian Rupee (INR), Thai Baht (THB), and Korean Won (KRW), which have all gained over 1.5% against the dollar in the past ten days, presents a valuable window of opportunity. We view these levels as an attractive entry point to protect against a sudden reversal. Traders should use this strength to establish hedges rather than chase the rally.
Specifically, derivative traders should consider buying put options on these vulnerable currencies, such as the THB or INR, for the coming weeks. This acts as insurance, providing downside protection at a relatively low cost if the ceasefire collapses and oil fears trigger a rapid flight to safety. The current low implied volatility in forex options makes these hedges cheaper than they might be in a full-blown crisis.
We must remember the market’s initial underestimation of geopolitical events back in 2022, where early optimism gave way to a sharp and prolonged risk-off period. The present situation feels similar, where financial assets are not accurately pricing in the significant physical risks on the ground. Therefore, caution and proactive hedging are the most prudent strategies for the weeks ahead.
