investingLive Asia-Pacific FX information wrap: Oil and the USD held agency, US-Iran pessimism

At a glance:

• Oil and the USD held firm as US-Iran pessimism deepened; Trump said the ceasefire is “on life support” on Monday, with CNN reporting he is now more seriously considering a return to major combat operations, frustrated by the Hormuz closure and stalled nuclear talks
• The Bank of Japan held rates at its April meeting but its Summary of Opinions, published Tuesday, warned that upside inflation risks are rising, with several members flagging possible hikes as soon as the next meeting
• Australian business confidence edged up to -24 in April from -29 in March but remained deeply negative, with conditions falling to their lowest since 2020 as energy costs squeezed margins, NAB data showed
• Japan and the US reaffirmed close coordination on currency markets, including intervention, after Finance Minister Katayama met Treasury Secretary Bessent in Tokyo; Bessent is expected to meet Prime Minister Takaichi before his visit concludes Wednesday
• Japan’s Nikkei remained supported but South Korea’s KOSPI pulled back sharply after touching an all-time high just below 8,000, as investors used Middle East uncertainty as a cue to book profits

Oil and the US dollar held firm on Tuesday as sentiment over the US-Iran conflict darkened further. Trump described the ceasefire as on life support on Monday, and CNN reported that he is now more seriously weighing a return to major combat operations, frustrated by the continued closure of the Strait of Hormuz and the lack of meaningful progress in nuclear negotiations. His national security team met at the White House on Monday to review options, though a major decision is not expected before the president’s departure for China.

The Bank of Japan kept its policy rate unchanged at its April meeting, but the Summary of Opinions published on Tuesday struck a notably hawkish tone, with board members warning that upside inflation risks are growing as crude oil prices surge. Several members flagged the possibility of a rate hike as soon as the next meeting.

In Australia, business confidence remained deeply depressed in April despite a marginal recovery to -24 from -29 in March, which had represented the second-largest monthly drop in the survey’s history. Business conditions fell to their second-lowest reading since 2020, with capital expenditure recording its steepest post-COVID decline as energy costs bit hard into margins.

In Tokyo, Finance Minister Katayama confirmed that Japan and the US reaffirmed close coordination on currency markets, including on intervention, following her meeting with Bessent. Both sides said Japan’s recent yen-buying activity is consistent with a joint statement signed last September. Bessent is expected to meet Prime Minister Takaichi before leaving for Seoul on Wednesday. Equity markets were mixed, with Japan’s Nikkei holding up while South Korea’s KOSPI retreated sharply after briefly touching an all-time high just below 8,000, as investors took the heightening Middle East uncertainty as a cue to lock in gains, and a South Korean official suggested citizens should receive an “AI dividend” funded by taxes on AI-related profits.

Coming up:

The US April CPI report is due at 1230 GMT / 0830 Eastern, and will be closely watched given the inflation pressures building across major economies. Via the Wall Street Journal , what’s expected: