The yuan’s USD/CNY pair edged down 0.1%, the offshore pair USD/CNH traded flat, won’s USD/KRW pair gained 0.4%, yen’s USD/JPY pair traded flat, while Singapore dollar’s USD/SGD edged 0.2% higher

Most Asian currencies edged lower on Thursday as the U.S. dollar firmed after a modest retreat overnight, while escalating conflict in the Middle East and a spike in oil prices dampened investor appetite.

The US Dollar Index edged 0.2% higher after sliding around 0.3% overnight. The index saw two days of strong gains at the start of the week.

US Dollar Index Futures traded 0.3% higher as of 04:34 GMT.

Sentiment remained cautious as the war in the Middle East showed little sign of easing. The war, which began last Friday when the U.S. and Israel launched major strikes on Iran, has since widened and triggered fears of a broader confrontation.

The U.S. sank an Iranian warship near Sri Lanka in international waters on Wednesday, raising concerns that hostilities could spread beyond the Persian Gulf and threaten key shipping routes.

Investors are watching developments around the Strait of Hormuz, one of the world’s most critical oil chokepoints, amid fears that the war could disrupt crude shipments through the narrow passage.

Oil prices surged sharply this week. Economies of most countries in the region are large net importers of energy, meaning higher crude prices can worsen trade balances and fuel inflation, often weighing on currencies.

The won’s USD/KRW pair gained 0.4% on Thursday.

The yen’s USD/JPY pair traded flat, while the Singapore dollar’s USD/SGD edged 0.2% higher.

In China, authorities indicated a 2026 economic growth target of around 4.5% to 5% – lowered after three straight years of “around 5%” targets.

The slight softening shows that growth stability remains important, but steady fiscal targets are also signalling a reluctance to lean too heavily on fresh stimulus to bolster growth, ING analysts said in a note.

The yuan’s USD/CNY pair edged down 0.1%, while the offshore pair USD/CNH traded flat.