Investors appear content to look past the simmering Middle East crisis after last week's cooler-than-expected inflation print eased fears of a near-term Fed hike, while robust tech-sector earnings gave sentiment an added lift.
However, that fragile optimism may soon be tested. Oil prices traded mixed after last week's advance, with Iran on Saturday calling on Washington to accept defeat, even as U.S. President Donald Trump urged Americans to brace for higher gasoline prices while the conflict grinds on.
"Any fresh rally in oil prices could, however, put a floor under the U.S. dollar selloff, temporarily," said Ipek Ozkardeskaya, Senior Analyst at Swissquote.
"The longer-term outlook for the U.S. dollar and U.S. bonds looks bearish: investors dislike the boiling Middle East war, which is costing the U.S. way more than it was supposed to."
South Korea's markets were shut for a public holiday, while the won KRW=KFTC barely stirred, last up 0.3%, after Trump directed the Pentagon to scale back joint military exercises with Seoul.
Indonesia, too, was closed for a holiday, after being struck by its deadliest earthquake in four years on Saturday.
China offered a more mixed picture. Data showed that growth lost steam at the start of the second half, with industrial output and retail sales slowing as extreme weather and stubbornly weak domestic demand pile fresh pressure on policymakers to ramp up stimulus.
Equities shrugged off the soft data, with the blue-chip CSI300 .CSI300 rising 1.6% and Hong Kong's Hang Seng .HSI gained 1.3%, powered by a chipmaker rally on strong earnings.
The yuan CNY=CFXS firmed a shade, up 0.06% and hovering near its strongest level since February 2023.
In emerging Europe, the Czech koruna CZK= added 0.3% against the dollar and held steady versus the euro EUR= after July producer prices rose 0.3% month-on-month and 1.6% year-on-year, both hotter than the 0.1% and 1.4% forecast.
Peers in the region were largely flat, while regional stocks slipped broadly.
South Africa's rand ZAR=D3 strengthened against the dollar as gold XAU=, the country's key export, ticked higher, while the benchmark JSE Top 40 .JTOPI added 0.3%. Attention now turns to this week's inflation data for fresh clues on the health of Africa's largest economy.
In Zambia, the currency ZMW= firmed 0.3%. President Hakainde Hichilema extended his lead in the country's election count. With more than half the country's constituencies counted on Sunday, Hichilema had won nearly 59 percent of the vote.
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