7/17, 5:06 PM (Source: TeleTrader)
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IMF estimates dollar is still highly overvalued

The dollar's real effective exchange rate advanced 4% last year and 3.4% more since the start of 2019, offsetting the 7% drop registered in 2017, the International Monetary Fund said on Wednesday. Authors of its report on the external sector said the fundamentals of the economy of the United States show the currency is overvalued by between 6% and 12% while the euro is undervalued by 8% to 18% in Germany and 1% to 4% in France.

Turning to China, the IMF noted its current account surplus declined by a whole percentage point last year to 0.4% of gross domestic product. In 2007 the measure was at 10%. The exchange rate is in line with fundamentals and the "desirable policies," according to the results of the survey. The world's current account surpluses and deficits reached 3% in 2018 and they have been slightly retreating where 35% to 45% are excessive, the organization said.

"An intensification of trade tensions or a disorderly Brexit outcome – with further repercussions for global growth and risk aversion – could, however, affect other economies that are highly dependent on foreign demand and external financing. Over the medium term, in absence of corrective policies, trade tensions could become entrenched, and further divergence of external stock positions could trigger costly disruptive adjustments in key debtor economies that could spill over to the rest of the world," the document adds.

Breaking the News / IT