FXStreet (Edinburgh) – FX Strategist at RBA Paul Robson believes the leg higher in the greenback has still room to climb further.
Key Quotes
“As the dollar rises anew, expect questions to resurface about USD over-valuation”.
“The USD doesn’t look significantly out of line with Purchasing Power Parity (PPP)”.
“It looks relatively expensive to European currencies but (still) cheap to commodity currencies”.
“Our BEER model (Behavioural Equilibrium Exchange Rate, based on relative prices and productivity) suggests the USD has started to trade richly”.
“However, in the past the USD has managed to stay even more richly valued, for even longer than it has done during the current cycle”.
“This has often been because the US economy enjoyed a period of out-performance, just as it’s currently doing”.
“Relative monetary policy correlates relative tightly with the USD bilateral exchanges. We do not expect this to change anytime soon. We think the dollar’s rise continues”.
(Market News Provided by FXstreet)