US dollar seen as fundamentally overvalued

The US dollar appeared to be fundamentally overvalued even after its slide over the spring and was likely to rise through to the end of 2017, given the likely contrast in the policies of the Federal Reserve and most other major central banks, Capital Economics said.

On a real and trade-weighted basis the value of the US dollar remained well above its average and trend levels of the last ten years, Capital Economics said in a research report sent to clients and dated 16 March.

“Furthermore, the IMF recently forecast that the US current account deficit would be the equivalent of nearly 4% of GDP in five years’ time, exceeding the 3% of GDP threshold that the Peterson Institute for International Economics considers compatible with sustainable external balance,” the think-tank said.