As the dollar dives, one of Asia-Pacific’s top-performing currencies is trouncing the Singdollar

[SINGAPORE] The US dollar (USD) skidded to a four-year low on Wednesday (Jan 28), sparking a broad currency realignment after comments from President Donald Trump accelerated a “Sell America” sentiment across global markets.

“The [US Dollar Index] (DXY) slammed lower after Trump mentioned… he is not concerned about the USD weakness and went on to criticise Asian countries for devaluing their currencies,” analysts from Maybank said in a note on Jan 28. 

The DXY index fell to 95.6 early on Asia’s Wednesday morning – its lowest level since early 2022. By around 2pm SGT, the index had pared its losses slightly to edge up at 96.

Standing out as a primary beneficiary is the Australian dollar (AUD), which has surged to its strongest position against the greenback in over two years this week. It is also one of the top-performing currencies in Asia Pacific this year, appreciating against the Japanese yen, Chinese yuan, Malaysia Ringgit, Thai baht, Indian rupee and Indonesian rupiah.

For Singapore-based investors and businesses, the Aussie’s strength is becoming increasingly expensive, too.

The AUD/SGD rate has established a steady upward trajectory, marking a turnaround in its fortunes from the last few years. It climbed to 0.8826 in Wednesday trading, the highest it has been for over a year.

The pair climbed 2.3 per cent in the past month, and on a year-on-year basis, the Aussie rose 4.5 per cent against the Singdollar.

Trump’s comments suggested that the administration is now favouring a weaker dollar to boost exports and temper imports, providing fresh impetus for markets’ bearish USD bets and other debasement trades, AmBank Group analysts said in a Wednesday note.

Adding to the list of investors’ concerns including risks of a government shutdown, uncertain Trump policies (including renewed trade/tariff risks), and speculation of US-Japan joint FX intervention towards USD devaluation, the G10 currencies rallied an astonishing 1.0-2.1 per cent against the USD, AmBank analysts said.

Aussie resurgence

The Australia dollar had been on a weak trajectory for the past few years due to a relatively strong dollar back then and a slowing Chinese economy hurting demand for commodities. But a weakening dollar and strong commodity prices recently have boosted the currency again.

As the greenback weakened, the AUD/USD pair punched through key resistance levels to trade at 0.7018 at around 8.30am on Wednesday.

This marks the currency’s highest level in over two years. Across the board, analysts remained bullish on the AUD.

“[The] pair has been lifted by positive risk sentiment and broader USD weakness for much of the past few sessions,” Maybank analysts said. 

“Firm industrial commodity prices further strengthen the near-term AUD backdrop,” OCBC analysts also noted. 

“Domestic factors helped as well – Australia’s stronger-than-expected labour report brought the probability of a rate hike in Feb back to 50 per cent from 26.1 per cent seen earlier last week,” Maybank added.

Further, Australia’s Consumer Price Index (CPI) delivered an upside surprise, accelerating sharply to 3.8 per cent year-on-year in December, up from 3.4 per cent the previous month. 

Headline inflation for the fourth quarter also quickened to 3.4 per cent, exceeding the Reserve Bank of Australia’s (RBA) November projections. This data, combined with a tightening labour market and a stronger-than-expected recovery in household spending, has firmly tilted the odds toward an earlier rate hike, potentially forcing the RBA to act in February.

The AUD also enjoys a distinct cyclical advantage, David A. Meier, an economist from Julius Baer, pointed out. With Australia’s GDP growth forecast to outpace most advanced economy peers in 2026, the Reserve Bank of Australia is under pressure to maintain a hawkish stance to curb sticky inflation.

This policy divergence positions the AUD to offer some of the highest interest rates in the G10 space.

However, Meier warned: “Despite these advantages, investors should keep in mind that the AUD is sensitive to Chinese demand and, as a cyclical currency, offers no protection in risk‑off episodes.”