Investing.com – Since the US presidential election, the US dollar has risen strongly from already high levels, and Bank of America Securities believes that the currency is currently perfectly valued.
On a real effective basis, the BoA estimated that the dollar ended 2024 at a 55-year high, following the longest upward trend in recent decades that began in mid-2011.
“The US dollar has also reached extreme levels in nominal terms. Using the broad BIS NEER (nominal effective exchange rate) index, the US dollar is the strongest in the last 30 years, i.e. since the beginning of the time series,” BoA Securities analysts said in a January 8 note.
The bank said the dollar appears overvalued by 18.5%, the most in 30 years, except when it was overvalued by 19% during the Ukraine war-induced energy shocks in 2022, the bank said.
Its revaluation has increased since the end of the third quarter of last year. by approximately 6.4%, largely due to the US elections. For comparison, at the end of 2016, after Trump’s victory in the first US elections, it was overstated by only 9.4%.
Looking at the G10 balance estimates, USD clearly stands out as the most overvalued, followed by CHF, with JPY and Scandinavia being the most undervalued.
“We expect the US dollar to remain sturdy in the compact term due to US inflation policies, and tariffs in particular, but to weaken later in the year as these policies weigh on the US economy while the rest of the world responds. Political uncertainty makes our baseline scenario subject to significant risk,” BoA Securities said.
