- In the G-10 space, the dollar has weakened over the past 16 months.
- … and largely strengthened over the past 2.
- For Asian FX, the narrative against the USD is not that neat.
- Since the beginning of 2025, region currencies have essentially split up into three groups.
Click here to read the full report.
Commentary: Currency dynamics beyond a commodity shock
Risk aversion around the March/April war in the Middle East has led to the broad dollar index strengthening by about 2% over the January/February period, reversing the preceding 12 months’ depreciation trend. But the development is hardly a general one.
Against G-10 currencies, except for the Japanese yen, the USD has depreciated substantially since the beginning of Donald Trump’s presidency last year. The trend turned mixed during March/April, with the likes of the Kiwi Dollar and Swiss Franc weakening a tad, and oil rich Norwegian Krona sustaining its appreciation trend against the USD.
The narrative is far more differentiated in Asia. Since the beginning of 2025, the region has essentially split up into three groups.
Group 1: The ascendant exporters
The AI wave has lifted the entire electronics ecosystem, with the exporters of China, Malaysia, and Singapore reporting record demand despite all the uncertainties with trade wars. The resulting bump in trade surpluses and the strong outlook for investments in electronics lifted these currencies. They have shown not much weakness since March either.
Thai baht’s outperformance story rests more on surging gold exports than electronics demand. That also explains why it has sold off lately, following the correction of gold price in the last couple of months.
Group 2: The ones under US pull
Japan, South Korea, and Taiwan are also exports stalwarts, but they faced a great deal of pressure from the US last year, while lacking the heft of China to push back. Pledges were made by their governments to move some of their supply chain to the US, to invest hundreds of billions of dollars there, and to be subject to monitoring that such commitments are being honoured. Torn between dynamic exports and challenges from the US, the currencies of these economics have been largely flat.
Group 3: The three under pressure
Indian rupee, Indonesian rupiah, and the Philippines peso have had idiosyncratic drivers of underperformance. While the latest bout of selloff may be attributable to exposure to potentially soaring energy import bills, there are other reasons too. A late cycle capital market dynamic (India), fiscal and governance concerns (Indonesia), and tech and political disruption (Philippines) have played their parts as well, in varying degrees.
With commodity prices and geopolitical turbulence likely to remain high, these currencies may well continue to behave as per their groupings in this analysis.
Click here to read the full report.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates & Digital Assets)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.