Dollar Is Overvalued?

The dollar is unlikely to strengthen against the euro and yen unless the Federal Reserve raises interest rates more than once in the coming months, according to Amundi Asset Management, which oversees about $1 trillion.

“The U.S. dollar is already overvalued against the euro and yen from most of the fundamental models”. The market does not believe that the Fed can hike much more in the future.”

Amundi’s view contrasts with Goldman Sachs Group Inc., which said this month that the euro may fall up to 10 U.S. cents as the European Central Bank is set to increase currency-weakening stimulus to meet its inflation target. The yen will weaken to 130 versus the dollar next year as Bank of Japan Governor Haruhiko Kuroda is set to boost monetary stimulus in October, Goldman Sachs analysts.

Fed’s Outlook

The dollar has surged 15 percent in the past 12 months to $1.1134 per euro and 10 percent to 119.83 yen. Strategists expect the greenback to strengthen to 125 yen and $1.07 against the euro at the end of year.

The dollar remains undervalued against many Asian counterparts. The currencies of Malaysia, Indonesia and Taiwan were among the worst performers against the dollar since China’s shock devaluation of the yuan on Aug. 11 triggered a global market rout.

The Chinese yuan devaluation has exposed the over-valuation problem of many Asian currencies.