Free Trial
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
FOREX
- The chart below ranks the major G10 currencies based on their percentage difference between the current spot rate and their 'fair' value, which we define using a Behavioral Equilibrium Exchange Rate (BEER) model (using terms of trade, inflation and 10y interest rate differentials as explanatory variables).
- According to our model, the Australian Dollar and Sterling are the two 'cheapest' currencies among the G10 world, undervalued by 15% and 13.2%, respectively, against the US Dollar.
- Interestingly, the Aussie has been constantly trending lower since its peak reached in February, which also corresponds to the peak in the Chinese economic activity based on our indicators.
- On the other hand, the Swiss Franc is still the most 'expensive' currency, overvalued by nearly +8% against the USD.
- It is surprising to see that the Euro is also 'expensive' using the BEER approach (+3.8%), unlike PPP approach where the Euro is usually the 'cheapest' currency in the G10 world.
- Even though AUD and GBP seem to be the 'value' currencies in the G10 world, it is important to note that they are both 'risk on' currencies and therefore very sensitive to a rise in price volatility.
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
We are facing technical issues, please contact our team.
ok
Your request was sent sucessfully! Our team will contact you soon.
ok