Monday, August 29, 2011

Dollar - purchasing power parity

Dollar Undervalued in Purchasing Parity

The dollar is poised for its biggest monthly gain since May, reclaiming its status as a haven while Switzerland and Japan boost efforts to weaken their currencies.
The greenback has appreciated 1.2 percent in August against a basket of the developed world’s nine most-traded exchange rates, according to data compiled by Bloomberg. That compares with a decline of 14 percent in the world’s reserve currency from this time last year through July.
Demand for U.S. assets is rising even though the Federal Reserve has pledged to keep its benchmark interest rate near zero through mid-2013 and Standard & Poor’s cut the nation’s credit rating from AAA. The two other currencies considered havens in times of financial and political strife -- the Swiss franc and yen -- are under siege by their governments and central banks after strengthening to records.
Comment: I guess that the dollar will maintain its rate to the euro around 1.45 yet may well rise against the Swiss frank and the Brazilian real among other of the main overvalued foreign currencies.

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