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FX Valuations Monitor (Q1 2024)

The US dollar has risen against most currencies since the start of the year, while most of our estimates of the greenback’s “fair value” are little unchanged. Taken together, this leaves the dollar somewhat overvalued in our assessment. At this point, we think most other G10 currencies are undervalued to varying degrees. Meanwhile, valuations among major EM currencies are more dispersed and there are still some cases of overvaluation among high “carry” currencies.

We doubt the greenback will strengthen much further from here, and expect it to gradually weaken after that as Treasury yields fall back. Meanwhile, we see scope for valuations of currencies of Emerging Asia to rise over the next couple of years.

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