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FX Valuations Monitor (Q4 2023)

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, while valuations among major emerging market currencies are more dispersed and there are still some cases of overvaluation among high “carry” currencies.

We expect the greenback to stay strong as the US and other developed markets slip into recession, and gradually weaken after that. Meanwhile, we see scope for valuations of currencies of Emerging Asia to rise over the next couple of years.

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