According to the Peterson Institute for International Economics (PIIE), the US dollar now looks “fundamentally” overvalued. However, valuations can stretch a long way before they snap, and other factors can have a greater influence on exchange rates in the near term. Indeed, given our view that the contrast between the monetary policies of the Fed and some other major central banks will be greater than expected over the next couple of years, we expect the dollar to climb higher still.
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