The dollar has reached quarter-century lows against sterling and record lows against the euro. Only the reluctance of emerging market economies to allow their currencies to appreciate faster has prevented a sharper decline in Asia. But despite having reached extreme valuations against some currencies - purchasing power parity estimates suggest that the dollar is 15 per cent undervalued versus the euro - there are still reasons to remain bearish. A slowing US economy, waning yield support and a deteriorating capital account will keep the dollar on a downward trend in the near term. But the rate of trade deficit shrinkage is not fully factored into expectations.
No comments:
Post a Comment