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

The United States Dollar (USD) is the most over-valued, with its valuation driven by expectations of fewer Fed rate cuts amid strong US consumption, as well as higher political uncertainty and trade tensions. Nevertheless, the USD's valuation could soften if job creation slows, as evidenced by non-farm payrolls for October which sharply missed expectations. Bad weather and a strike may have distorted the numbers, and further data is needed to assess if there is underlying softness. Meanwhile, the Fed could keep to its previous guidance for further rate cuts, while awaiting further clarity in fiscal policy.

Commodity-linked currencies, such as the Australian Dollar (AUD), the New Zealand Dollar (NZD) and the Canadian Dollar (CAD) have become relatively more under-valued compared to most G10 currencies (except the Japanese Yen). This partially due to aggressive rate cuts, with both RBNZ and BOC having cut rates by an outsized 50bps in Oct to support subdued economic activity as inflation eases. However, China's recent easing of monetary policy and housing market regulations, alongside a potential sharp increase in fiscal spending to bolster growth, could boost demand for commodities and support prices. This positive development is likely to support the valuations of commodity-linked currencies.