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MUFG's Senior Currency Analyst Lloyd Chan highlights that improved diplomatic signals in the Middle East have boosted risk appetite, weakening the US Dollar (USD) and supporting Asian currencies. While Asian FX pairs like USD/JPY and USD/KRW have seen downward pressure, high US front-end yields continue to provide underlying strength to the USD. Bond markets remain cautious, reflecting uncertainty about the sustainability of the USD's decline. For traders, the interplay between geopolitical de-escalation and US monetary policy creates a complex landscape. Asian currencies may benefit from reduced risk-off flows, but USD resilience could cap their gains. Investors should monitor Middle East developments and US Treasury yield movements for directional clues. The broader forex market remains sensitive to both geopolitical and macroeconomic catalysts.
