Societe Generale said emerging market currencies have broadly weakened against the U.S. dollar since geopolitical tensions escalated in the Middle East, highlighting growing pressure on risk-sensitive assets despite improving investor sentiment in some regions.
According to a research report titled “Cooling Tensions in the Oil Market,” obtained by Al Mal, the bank noted that the South Korean won recorded the sharpest decline among major emerging-market currencies, falling nearly 3% against the dollar since the onset of the crisis.
The Indian rupee followed with a decline of around 2%, while the New Taiwan dollar weakened by approximately 1%. Meanwhile, the Chinese yuan posted a more limited decline of roughly 0.3%.
In contrast, Latin American currencies delivered mixed performances. The Mexican peso remained relatively stable, while the Brazilian real gained nearly 3%.
At the same time, the South African rand fell around 3%, reflecting broader investor caution toward commodity-linked and risk-sensitive emerging market assets.
Euro
Societe Generale said the euro initially weakened by nearly 1% against the dollar at the start of the crisis before recovering to levels close to those seen at the beginning of the year, trading near $1.18 as risk appetite improved and safe-haven demand for the dollar eased.
The bank noted that drivers affecting the euro-dollar exchange rate remain mixed. On one hand, economic conditions continue to provide relative support for the dollar because Europe is viewed as more vulnerable to energy-price shocks. On the other hand, tighter monetary policy expectations from the European Central Bank could continue supporting the European currency.
Sterling
Regarding the British pound sterling, the bank said the currency has returned to pre-crisis levels near $1.35, supported by stronger investor sentiment and expectations that the Bank of England will continue raising interest rates as inflation remains above the 2% target level.
Yen
Societe Generale also noted that the dollar continued strengthening against the Japanese yen, climbing to around 159 yen compared with approximately 156 before the latest geopolitical escalation.
The bank attributed the move largely to Japan’s vulnerability as a major net energy importer, warning that higher import costs could weigh on industrial production and economic activity. Against this backdrop, Societe Generale said it maintains a neutral position on the dollar-yen pair.
Swiss Franc
The report further indicated that the Swiss franc has not fully performed its traditional safe-haven role during the recent market turmoil.
The euro weakened only modestly against the franc to around 0.92 francs, while the Swiss National Bank continued to keep interest rates at 0% and signaled readiness to intervene in currency markets to limit excessive franc appreciation.
As a result, the bank said it has adopted an underweight stance toward the franc relative to broader market positioning.
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