Asian Currencies Steady Amid Risk-Off Tone, Yen Holds Near Highs

The Asian currency market remained stable on Thursday as investors continued to adopt a risk-off tone due to rising oil prices and renewed tensions in the Middle East. The Japanese yen held near its recent highs, with some analysts attributing its strength to expectations of faster Bank of Japan (BOJ) tightening, repatriation of Japanese funds, and the unwinding of carry trades.

The U.S. dollar steadied as oil prices topped $101.94 a barrel before paring gains, remaining above $100. The recent escalation in tensions between the US and Iran has raised concerns about further disruption to Middle East energy supplies. Higher oil prices are putting additional pressure on inflation, already reflected in higher bond yields.

The BOJ is expected to raise rates by 25 basis points on September 18, with the outcome of Friday's U.S. inflation report likely to influence the yen through the dollar and interest-rate gap. The Reserve Bank of India's support may temper rather than reverse the decline of the Indian rupee, which faces renewed pressure from higher oil prices.