Cyclical challenges will curb Asian currencies' strength in the next quarters after rallying in the past month, HSBC said in a Tuesday research note.

The solid performance of Asian currencies over the last month stemmed from three main factors, including the postponed US reciprocal tariffs and a temporary exemption for electronics in April, the equity research firm said.

The other drivers include the "de-dollarisation" theme following concerns on the US Federal Reserve's independence, as well as optimism due to reported progress in trade talks between the US and China.

However, many Asian currencies weakened on Monday after the release of the US-China Geneva trade meeting statement, which HSBC attributed to a reduction in large short US dollar positioning.

Still, the research firm expects ongoing trade talks to ultimately be a net gain for Asian currencies, potentially easing cyclical headwinds and shedding light on US concerns about "currency manipulation" in the region.

Meanwhile, high uncertainty surrounding US trade policy suggests limited upside for the US dollar against Asian currencies, HSBC said.

The research firm also expects any global rebalancing or asset diversification to come gradually.