Currencies. 2013.9

Twice a year, we calculate the fundamental value of the main currencies following our own model. Of course we use PPP, expected inflation and interest rates, GDP, flows... as some of the variables for our model. But let´s see the results.

Again CHF and NOK appear overvalued, even more than at the beginning of the year, 29% and 25.7% against the euro, respectively. The premium is bigger than in our previous study, which is contradictory with the belief of a recovery: why are investors paying a higher price to own CHF and NOK if EUR or USD are doing fine? As these 2 countries are following "the crowd", they are in big danger of getting very high inflation. They are reluctant to increase interest rates, but they should do it in a firm way as soon as possible.

EURUSD is fairly priced (overvaluation of 4.3% for the dollar) which means a pivot price of 1.377, USDCAD absolutely around its fundamental value, and even the AUD not too far.

EURGBP has a pivot price of 0.747, currently trading at 0.843, and EURJPY of 96.75, currently at 130.8. UK and Japan are forcing their currency valuation without limits. So far, it´s being accepted by the others.