IMF: USD overvalued by 15-35%

mjbommar · Sun, 07-30-2006, 06:14 PM

IMF review sees US dollar overvalued by 15-35 pct

Quote:

WASHINGTON, July 28 (Reuters) - An International Monetary Fund staff assessment of the U.S. dollar has estimated it is overvalued by 15 percent to 35 percent.

"The real exchange rate appeared significantly overvalued, especially given the projected deterioration of U.S. net foreign liabilities," IMF documents said on Friday that detail annual economic consultations with U.S. officials.

"A staff assessment using macroeconomic fundamentals estimated the overvaluation in the 15-35 percent range," the documents say.

However, the global lender said U.S. officials cautioned that such estimates were highly sensitive to underlying assumptions and it was best left to markets to determine appropriate exchange rate levels. Foreign investors also showed no signs of becoming less willing to invest in U.S. markets, the officials added.

"In this context, (officials) expressed concern that exchange rate inflexibility and other factors were impeding needed adjustment in many countries' competitiveness," the IMF document said.

Given the projected upcoming rate hike hiatus and the treasury action given the market's latest rebound, how do we feel about this being realized on the FX?

One of the big things I'm looking at here is how companies that rely on the dollar's buying power for their competive margins will adjust. We could see a big shake up in some of these manufacturing industries.

Anyone know of any banks that handle the futures contracts on USD/CAD, EUR/USD, and the big USD/CNY? IMO, as the dollar weakens, we're going to see a big surge of futures contracts on currency.

Just interested in seeing how others are reacting to this claim.
TIA.

mjbommar · Sun, 07-30-2006, 08:21 PM

I'm playing a few lots in EUR/USD and GBP/USD and rally mode feels close at hand. Some of the arbitrage between them is working itself out through JPY, but watch for the JPY to stabilize for a rally against the $.

Should be an interesting month for the USD.

Sun, 07-30-2006, 08:21 PM	#2 (permalink)
mjbommar Member Join Date: Jul 2006 Location: Ann Arbor, MI Posts: 60	I'm playing a few lots in EUR/USD and GBP/USD and rally mode feels close at hand. Some of the arbitrage between them is working itself out through JPY, but watch for the JPY to stabilize for a rally against the $. Should be an interesting month for the USD. __________________ All IMO. GLTA. "Temporal bandwidth," is the width of your present, your now. It is the familiar "∆t" considered as a dependent variable. The more you dwell in the past and in the future, the thicker your bandwidth, the more solid your persona. But the narrower your sense of Now, the more tenuous you are. -Pynchon =m

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