MUFG: US Dollar Undervaluation Signals Downside Risks
MUFG’s G10 regression models suggest the US dollar is undervalued against most peers, reflecting risk premia from Middle East tensions, inflation worries, and political pressure on the Federal Reserve, according to analyst Derek Halpenny.
MUFG analyst Halpenny points to G10 regression models indicating the dollar is trading below fair value versus most major currencies. The undervaluation is attributed to risk premia driven by the ongoing Middle East conflict, elevated inflation uncertainty, and perceived political interference at the Federal Reserve.
These factors suggest that the dollar’s current pricing still embeds downside risks, despite the apparent cheapness. The research note flags the potential for further weakness if these risk factors intensify.
Source: FXStreet Forex News