Is the US Dollar over valued?

With the Russian Ukraine invasion, the washing institute predicted that the euro would have a dramatic decline against the greenback.

A lot of investors disagreed with the prediction and speculated the opposite way. Their reason behind the opposite perspective was apparent, the Euro Central bank is going to raise the interest rates and as a result, the Euro will eventually get stronger.

But the investor speculation came across an extensive setback, the Euro was worth 0.98 against the US dollar. And due to the rising energy prices because of the Russia-Ukraine war, the surplus in trade has turned into a current account deficit.

The IIF chiefs economist made a statement a few months ago that the pound is overvalued at its current value of $1.35 and the trade market is ignoring the fact the UK current account deficit has increased from three per cent to eight per cent. In the past few weeks the sterling crashed to almost 0.98 against the greenback, Euro followed the same route as well. Economic experts argue that the crash represents the actual trade deficit and rising energy prices for Eurozone and UK.

Indeed experts believe the pound and sterling are still overvalued at 10% and 20% respectively. According to experts Turkish Lira and Newzealand buck are also above their actual value. While the Chinese Yen and Norwegian Krone are well below their actual value, 11% and 47% respectively. The current account balance reflects a country's position to attract foreign investment, thus it directly impacts the value of the currency too. To some Pundits, this style of analysis seems old and trivial, but the current state of point and Euro proves the former.

The asset managers are focusing on other issues such as shaping Capital and taking leverage of loose monetary policy. Borrowing in one currency cheaply and investing in higher return investment somewhere else. This kind of investment has seen a sudden resurgence in recent times.

The IIF’s prediction suggested that the dollar was well above its actual value, instead it strengthen recently, given the record current account deficit. The American capital market ruling and currency made it a safe refuge.