Investing.com – The US dollar has risen strongly since the US Presidential election, from an already high level, and Bank of America Securities sees the currency now priced to perfection.
In very effective terms, BoA believed that the dollar ended 2024 at a 55-year high, after the longest rise in recent decades, which began in mid-2011.
“The USD has also reached very high levels in nominal terms. Using the broad BIS NEER (nominal effective exchange rate) index, the USD is the strongest it has been in the last 30 years, which is when the time series began, ”said analysts at BoA Securities, in a note dated January 8.
The dollar appears overvalued by 18.5%, the most in the last 30 years except for the 19% overvalued during the energy fallout from the war in Ukraine in 2022 , the bank said.
Its valuation increased by around 6.4% from the end of Q3 last year, largely due to the US election. In contrast, it was only 9.4% overvalued at the end of 2016, after Trump won his first US election.
Looking at the G10 parity estimates, the USD clearly stands out as the most valuable – followed by the CHF, with the JPY and the Scandies being the most valuable.
“We expect the USD to remain strong in the short term on the back of US inflationary policies, and particularly tariffs, but to weaken later in the year, as these policies affect the economy of the SA while the rest of the world responds. Policy uncertainty leaves our bottom line at significant risk,” BoA Securities said.
