Nomura Raises the Scenario Weight for a US-Iran Deal and Adjusts FX and Rates Strategy Trades

Overview

This report is a Nomura Global Markets Research FX Insights strategy note on how to adjust FX and rates positioning after more constructive progress in US-Iran talks over reopening the Strait of Hormuz. The report says that Trump's comment that a peace deal was largely done and that the reopening of the Strait of Hormuz would be announced soon, together with Iran's reference to a memorandum of understanding and the possibility of a broader agreement within 30 to 60 days, has increased the room for risk assets to rebound, the dollar to weaken, and some Asian currencies to recover.

Core views

The core view is that there is still a meaningful chance the U.S. will push for the Strait of Hormuz to be reopened, while Iran's demands on passage fees, uranium enrichment, and similar issues may be deferred to a later stage. If the U.S. does not make these issues a precondition for reopening the strait, risk assets could rise further, the dollar could soften, and some Asian currencies could recover. If, however, the U.S. insists on resolving these issues first, Iran may continue to hold out and near-term deal risk remains. Based on this view, the report further raises conviction on short USD/CNH, initiates short USD/TWD, and maintains a range of Asian and G10 FX relative-value trades as well as receive-fixed strategies in Korean and Singapore rates.

Analysis framework

The report uses an event-driven macro strategy framework, taking progress in the US-Iran negotiations as the main thread and assessing how it transmits into oil prices, risk appetite, the DXY, Asian currencies, G10 currencies, and Asian rates markets. The FX section combines DXY sensitivity, the RMB fixing, corporate dollar repatriation, capital inflows, valuation models, the technology cycle, central-bank policy, and current-account pressure; the rates section combines the easing of the energy shock and the resulting unwind of rate-hike premium, differences in pricing between Korea and India, SGD inflows into Singapore, and SORA fixing dynamics.

Methodology notes

• macro event-drivenUS-Iran deal scenario analysis

  Use negotiation progress, policy statements, and whether key conditions are front-loaded to judge the direction of risk assets, the dollar, and oil.

  The report treats the reopening of the Strait of Hormuz as the key macro event; if the deal advances and disputed conditions are left for later, risk appetite improves, the dollar weakens, and Asian FX recover. If the conditions are front-loaded, the risk of deal failure rises.

• FX relative valueDXY sensitivity and currency valuation model

  Use the asymmetric sensitivity of USD/CNH to DXY upside and downside, the RMB fixing, corporate dollar holdings, and the degree of undervaluation in REER models to support short USD/CNH.

  The report notes that since the Iran war, the DXY has risen 1.4%, but USD/CNH has fallen 1.2%; USD/CNH's sensitivity to DXY downside is about 54%, higher than its sensitivity to DXY upside of about 24%, and RMB is undervalued by an average of 9.5% across four valuation models.

• rates strategyFalling rate-hike premium and curve relative value

  If Middle East risk eases, the rate-hike premium priced into some Asian markets may unwind, supporting Korea NDIRS and Singapore SORA receive-fixed trades.

  The report believes that Korea and India have priced in more rate-hike expectations, but Korea's fiscal and supply-demand backdrop is better, and even after BOK hikes the market may reprice cuts; therefore it maintains receive 2yfwd2y Korea NDIRS.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• short USD/CNH

  Directly benefits from a weaker dollar, a lower RMB fixing, and the risk-appetite improvement from a US-Iran deal.

  Strengths

  Conviction raised to 4/5; target 6.60; RMB undervaluation, corporate dollar repatriation, and a better China-U.S. backdrop provide support.

  Weaknesses

  If the deal fails, the dollar rebounds, or Chinese policy does not want RMB to appreciate too quickly, the trade could come under pressure.

  Comparison

  The report argues that USD/CNH is more sensitive to DXY downside than upside, so it is a cleaner expression of dollar weakness than some other Asian currencies.

  Risks

  Breakdown in US-Iran talks, renewed DXY strength, changes in RMB fixing policy constraints.

• short USD/TWD

  Expresses TWD appreciation through a weaker dollar, the AI cycle, and inflows into Taiwan equities.

  Strengths

  New position, conviction 3/5; Taiwan benefits from global AI demand, TSMC high capex, and the export-investment cycle.

  Weaknesses

  The report assigns only medium conviction, indicating it remains cautious about Middle East developments and CBC FX operations.

  Comparison

  Relative to other Asian currencies, TWD has already performed strongly since the Iran war; the report thinks it can still benefit if energy prices ease.

  Risks

  An extended US-Iran stalemate, cooling AI capex, larger CBC dollar buying, or weaker-than-expected exporter and life-insurer behavior.

• long SGD/IDR

  Expresses the divergence between Singapore's macro resilience and Indonesia's policy, fiscal, and capital-outflow pressure.

  Strengths

  Maintained at 4/5 high conviction; Singapore GDP is strong, inflation risks are tilted up, and MAS may keep tightening FX policy.

  Weaknesses

  If external risk eases materially, IDR could benefit in the short term from a rebound in risk appetite.

  Comparison

  The report thinks that even if the external environment improves, IDR will still be weighed down by local policy uncertainty, fiscal issues, and concerns over central-bank independence.

  Risks

  Indonesia policy details turn out better than expected, foreign capital returns, or MAS policy is less tight than expected.

• long EUR/INR

  Expresses INR medium-term relative underperformance and support for EUR.

  Strengths

  Maintained at 3/5; reserve depletion, portfolio outflows, and stagflation concerns support INR weakness.

  Weaknesses

  RBI intervention may suppress volatility, so the report lowered the stop-loss to 110.5 to lock in some gains.

  Comparison

  Compared with Asian currencies that benefit more directly from short-term risk repair, INR's medium-term pressure comes more from local reserves and flows.

  Risks

  Heavy RBI intervention, renewed foreign interest in Indian assets, or a weaker EUR.

• long EUR/PHP

  Originally expressed medium-term PHP depreciation pressure, but the report has taken profit on short-term deal-related upside.

  Strengths

  The medium-term thesis still includes the current-account deficit, local FX deposit outflows, and political uncertainty.

  Weaknesses

  If a US-Iran deal is reached, expectations for overseas worker remittances and BSP's accommodative intervention stance could allow PHP to outperform in the short term.

  Comparison

  Unlike EUR/INR, PHP has already depreciated markedly since the Iran war, so near-term rebound risk is higher.

  Risks

  A deal triggers a rapid PHP recovery, or BSP does not prevent USD/PHP from falling.

• long CHF/JPY

  One of the highest-conviction G10 trades, benefiting from improved European currencies as energy prices ease and lower JPY intervention risk.

  Strengths

  Maintained at 4/5; seasonal flows still support CHF, and USD/JPY is far from recent highs, reducing intervention pressure from Japan's Ministry of Finance.

  Weaknesses

  If the SNB intervenes earlier to buy FX or JPY safe-haven demand rises, the trade could come under pressure.

  Comparison

  Compared with EUR/SEK, the report prefers keeping CHF/JPY and taking profit on EUR/SEK.

  Risks

  Deterioration in the Middle East triggers JPY safe-haven demand, SNB policy shifts, or European risk appetite worsens.

• receive 2yfwd2y Korea NDIRS

  Expresses a pullback in Korean rate-hike premium and curve flattening after Middle East risk eases.

  Strengths

  Maintained at 4/5 high conviction, target 3.75%; Korea's fiscal and supply-demand dynamics are better than India's, and WGBI inflows provide support.

  Weaknesses

  If the BOK hikes more than expected or inflation pressure persists, the receive-fixed trade could be pressured.

  Comparison

  The report is more constructive on Korea than India because Korea has less risk of a large one-off hike and better bond supply-demand conditions.

  Risks

  Oil prices stay high, the BOK turns more hawkish, or Korean inflation/fiscal risks rise.

• receive Jun-1y SORA

  Expresses SGD inflows, higher foreign-exchange reserves, and front-end SORA carry.

  Strengths

  Maintained at 3/5; expected average SORA fixing is about 1.1%, so front-end receive-fixed still offers good carry.

  Weaknesses

  If MAS tightens more or US rates remain high, front-end rates could rise.

  Comparison

  Compared with Korea NDIRS, this trade has a lower conviction, but it aligns with the Singapore FX inflow and reserve-growth story.

  Risks

  Global rates move higher again, SGD inflows slow, or MAS policy path changes.

Key data

• short USD/CNHConviction 4/5, target 6.60, target date end-August 2026Conviction was raised from 3/5 to 4/5; reasons include a weaker dollar, a lower RMB fixing, corporate dollar repatriation, capital inflows, and RMB undervaluation.
• USD/CNH sensitivity to DXYDXY upside sensitivity about 24%, DXY downside sensitivity about 54%The report argues that USD/CNH is more sensitive to dollar weakness, giving it greater downside room in a weaker-dollar scenario.
• RMB valuationFour FX valuation models show RMB is undervalued by an average of 9.5%, and productivity-adjusted REER is undervalued by 19.3%Valuation factors are used to support RMB appreciation and short USD/CNH.
• short USD/TWDNew position, conviction 3/5, target 30.5, target date end-September 2026Drivers include a weaker dollar, improved risk appetite, spillover from CNH appreciation, AI demand, and Taiwan technology capex.
• Taiwan GDP forecast2026 GDP growth forecast raised from 8.0% to 8.4%Nomura's economics team believes the AI-driven export and investment cycle can offset the Middle East shock.
• long SGD/IDRMaintain 4/5 conviction, target 14,200, target date end-August 2026The report remains constructive on SGD versus IDR, citing Indonesia's policy uncertainty, fiscal pressure, concerns over central-bank independence, and capital-outflow pressure.
• Singapore GDP1Q 2026 final GDP growth was 6.0% y/y, above the initial 4.6%Singapore's economic resilience and upside inflation risks support the view that MAS may tighten FX policy further in July.
• long EUR/INRMaintain 3/5 conviction, target 113, stop-loss lowered to 110.5The report believes the RBI may continue buying FX as the dollar falls, while India's portfolio inflows remain weak, leaving INR with medium-term relative underperformance pressure.
• India FX reserves and fund flowsSince March 2026, the RBI is estimated to have sold USD26.5bn in spot reserves; portfolio flows were outflowing USD2.1bn from May 1 to 21Reserve depletion and capital outflows support the view of INR weakness.
• G10 FXMaintain long CHF/JPY 4/5, long EUR/GBP 3/5, long USD/CAD 3/5; take profit on long EUR/SEK and lower conviction to 2/5The report sees easing Middle East risk as slightly positive for European currencies, but each pair still depends on local cycles, central-bank policy, and oil beta.
• Asia ratesMaintain receive 2yfwd2y Korea NDIRS 4/5, target 3.75%; maintain receive Jun-1y SORA 3/5If the deal advances, the rate-hike premium in some Asian markets may ease; Korea is preferred over India.

Impact & implications

If the US-Iran deal advances and the Strait of Hormuz is reopened, the market may continue to trade a recovery in risk appetite, dollar weakness, a rebound in Asian FX, and a pullback in rate-hike premiums in some rates markets. The most direct expressions are short USD/CNH, short USD/TWD, long SGD/IDR, receive Korea NDIRS, and receive SORA. If negotiations fail or disputed conditions are front-loaded, the report's risk-asset rebound and weaker-dollar logic would face reversal risk, especially for high-beta Asian currencies and oil-sensitive assets.

Risks

• The US and Iran fail to reach a deal in the near term, delaying the reopening of the Strait of Hormuz.
• The U.S. makes passage fees, uranium enrichment, and similar issues preconditions for reopening the strait, causing Iran to keep delaying.
• Oil prices remain high or rise again, weakening risk appetite and supporting the dollar.
• The DXY strengthens again, hurting Asian FX trades such as short USD/CNH and short USD/TWD.
• Asian central-bank intervention or policy changes limit local-currency appreciation, for example if CBC, RBI, MAS, or BOK actions fall short of expectations.
• Easing Indonesia policy risks or renewed foreign inflows weaken the long SGD/IDR thesis.
• A slowdown in global AI demand or technology capex weakens support for TWD.

What to watch

• Whether the U.S. formally announces a Strait of Hormuz reopening deal, and whether passage fees and uranium enrichment are pushed to a later stage.
• Iran's follow-up remarks on control of the strait, passage fees, and uranium enrichment.
• Changes in the DXY, the USD/CNH fixing, corporate RMB conversion, and cross-border capital inflows.
• USD/TWD, foreign inflows into Taiwan equities, TSMC capex, and global AI demand data.
• Policy details related to Danantara Sumberdaya Indonesia, S&P rating outlook, and foreign capital flows.
• MAS July FX policy, Singapore GDP, and the path of core inflation.
• BOK policy communication, the Korea NDIRS curve, and changes in rate-hike premiums across Asian markets.
• Oil prices and the second-order impact of Middle East geopolitical risk on CAD, JPY, Asian FX, and rates markets.