At present, the commodity currencies are more overvalued than any of their G10 counterparts at 15% in trade weighted terms, almost as much as they were a couple of years ago before they corrected substantially lower due to weaker commodity prices and rate cuts from the central banks. Partly, their past year’s recovery probably reflects such fundamentals as above average growth and rising commodity prices, but also the attractive yield offered by the AUD and NZD compared to most other currencies has contributed. Although both are still substantially overvalued, they are less so than a few years ago.
Eventually they will correct lower against virtually all other G10 counterparts, but probably not just yet.
Copyright © 2017 SEB, eFXnews™Original Article
