What is the best treatment for dry rot?
You could have fungus growing without dryrot. If a board sits wet for a couple of days something could grow on it but it wouldn’t have time to rot. Rot is worse because it completely destroys the wood. You must remove and replace rotten wood, as it has no strength at all. It sounds to me like an exterior surface of the house is growing fungus, caused by shower water penetrating the interior wall and soaking the siding material. If this is correct, the problem is more in your shower enclosure than your siding. Sure, the siding needs to be removed and replaced where it is rotten, but more importantly the shower needs to be repaired. It’s not possible to diagnose the source of the leak from your question, but there could be a leaky water pipe in the wall, a leak in the shower wall itself, or a leak in the shower drain. If the water isn’t coming from inside but from rain and weather, then you still need to replace the rotten siding and make sure this time that it is properly flashed above
