The DBS Equilibrium Exchange Rates (or DEER) indicate fair values for global currencies relative to a trade-weighted currency basket.

Across G10 currencies, the USD (United States Dollar) still stands as the most over-valued. The USD is already displaced by the AUD from its position as the highest yielding currency in G10 after RBA hiked rates to 3.85% in February. Its yield advantage is set to narrow, with markets expecting another Fed rate cut by the middle of 2026, after Powell relinquishes his position as Fed Chair in May. Now, US equity markets are also trailing global peers, with US tech stocks facing pressures amid AI disruption risks and concerns over an AI investment splurge. US exceptionalism is no longer the case in 2026, which could result in the USD's exceptional over-valuation coming off even more.

JPY (Japanese Yen) still stands as the most under-valued across G10 currencies. Following LDP's landslide victory in the February Lower House election, fiscal fears have eased somewhat as the Takaichi government has clarified that a promised 2Y suspension of the consumption tax on food will not rely on additional bond issuance. Furthermore, government officials including Finance Minister Katayama have also said that they are paying attention to markets post-elections, which should curb excessive speculation against the JPY. Speculative JPY shorts may be squared further once fiscal concerns are shown to be overblown, allowing the JPY to recover from its deep undervaluation.