Greenback now priced for perfection – BoA Securities

Investing.com – The US greenback has rallied strongly because the US Presidential election, from an already excessive degree, and Financial institution of America Securities sees the foreign money now priced to perfection.

In actual efficient phrases, BoA estimated that the greenback ended 2024 at a 55-year excessive, following the longest uptrend in latest many years, which began in mid-2011.

“The USD has additionally reached excessive ranges in nominal phrases. Utilizing the BIS NEER broad index (nominal efficient trade fee), the USD is the strongest it has been within the final 30 years, which is when the time sequence began,” stated analysts at BoA Securities, in a observe dated Jan. 8.

The greenback seems overvalued by 18.5%, probably the most within the final 30 years besides when it was overvalued by 19% in the course of the vitality shocks from the conflict in Ukraine in 2022, the financial institution stated. 

Its overvaluation elevated by about 6.4% because the finish of Q3 final 12 months, to a big extent due to the US election. By comparability, it was overvalued solely by 9.4% on the finish of 2016, after Trump received his first US election.

G10 equilibrium estimates, the USD clearly stands out as probably the most overvalued – adopted by CHF, with JPY and the Scandies being probably the most undervalued.

“We anticipate the USD to stay robust within the brief time period on the again of US inflationary insurance policies, and notably tariffs, however to weaken later within the 12 months, as these insurance policies take a toll on the US financial system whereas the remainder of the world responds. Coverage uncertainty makes our baseline topic to substantial dangers,” stated BoA Securities.