Most Asian currencies traded in narrow ranges as renewed war in the Middle East kept oil prices elevated

Won climbed to a 2-1/2-month high on Thursday after stronger-than-expected economic growth reinforced expectations for another Bank of Korea rate hike, while the yen steadied near a four-decade low as investors weighed prospects for tighter Bank of Japan policy against persistent pressure from a strong dollar.

Most Asian currencies traded in narrow ranges as renewed war in the Middle East kept oil prices elevated, weighing on sentiment across the economies of energy-importing countries ahead of next week’s central bank meetings.

The USD/JPY pair traded at 163.06, keeping the yen near its lowest level since December 1986 after reaching 163.23 earlier this week, as investors continued to assess the outlook for Bank of Japan policy and the possibility of official intervention.

Meanwhile, the USD/KRW pair dropped 0.6% to 1,468.61 won, its highest level since May 11, making the unit one of Asia’s best-performing currencies after South Korea’s economy expanded 0.6% in the second quarter, comfortably ahead of forecasts for 0.4% growth.

ANZ said resilient semiconductor exports and the country’s role in the global AI investment boom should continue to support growth, while higher oil prices increase the risk of broader inflation pressures.

Indonesia’s rupiah was little changed after Bank Indonesia unexpectedly kept its benchmark seven-day reverse repo rate unchanged at 5.75%, despite many economists expecting another rate increase following two consecutive hikes.

Instead of tightening policy further, Governor Perry Warjiyo announced additional measures aimed at attracting foreign capital, including lowering the cost of foreign-exchange hedging transactions and encouraging greater use of regional currencies in cross-border trade. The USD/IDR pair traded around 17,891 rupiah, with the unit holding well above the record lows seen in June.