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

The Swiss Franc (CHF) has rallied by over 12% against the USD on a year-to-date basis, and its overvaluation has expanded to its highest since Jan 2024. CHF has benefited from safe haven demand given rising geopolitical risks, with the conflict between Israel and Iran now escalating to airstrikes on Iranian soil. The extremely strong CHF is not welcome by the SNB, as Switzerland's headline inflation has already fallen to -0.1% y/y in May. Rate cuts by the SNB to ward off flows are more likely than FX market intervention, which faces a higher hurdle given the US Treasury's placing of Switzerland on its currency monitoring list. Given currently high valuations, CHF strength could be tempered if Middle East tensions stay contained, or if the SNB decides to enact negative rates.

The US Dollar (USD) remains highly over-valued even after a broad-based sell since the April 2 "reciprocal" tariffs. Global investor confidence in US economic policymaking has been dented by news of a likely return to unilateral tariffs by Trump, which many see as a move that will dampen prospective returns in US capital markets. Asian currencies of countries with significant holdings of US assets are also seeing the most strength against USD, since many Asian investors are now looking to either hedge their USD risks or diversify into non-USD assets. Inflows back to Singapore and Hong Kong have already led to a large decline in short-term SGD and HKD rates against equivalent USD rates. This underscores a significantly diminished Asian appetite for the USD, coupled with unattractive valuations.