The Singapore dollar is the top-performing Southeast Asian currency this year, but slowing inflation and growth worries may push it down the rankings in coming months.

The city-state’s currency is up about 5% versus the dollar this year, sending its value against a trade weighted basket of currencies toward the upper boundary of the Monetary Authority of Singapore’s policy band. However, headwinds appear to be picking up, with the trade ministry last month cutting its 2025 GDP growth forecast to a range of 0% to 2%, citing global trade tensions.

In addition, the MAS lowered its core inflation target, opening the door for further easing this year, which may also weigh on the currency. The central bank uses the exchange rate as its main policy tool rather than interest rates. It focuses on the currency’s nominal effective exchange rate, referred to as S$NEER, which it allows to move within a policy band.

That rate is 1.1% above the mid-level of MAS’s policy band, according to estimates from Philip Wee, senior currency economist at DBS Bank Ltd. He believes it “should be closer to mid given where the new and lower inflation and GDP growth forecasts are.”

The country’s non-oil domestic exports data due Friday may offer insights into the early effects of tariffs.

“It is possible that the S$NEER may start to ease toward the midpoint when the hard data starts to snap toward the pessimism that is increasingly reflected in the survey data,” said Moh Siong Sim, FX strategist at Bank of Singapore.

What’s more, the MAS may decide it needs to act to resolve market imbalances.

“MAS will be closely watching further appreciation in the S$NEER and they will be present to moderate any outsized S$NEER strength,” predicted Saktiandi Supaat, head of FX research at Malayan Banking Berhad.