Gavekal Capital: A Stronger Dollar Is Bringing The Euro Closer To Even Value

Wednesday, August 20, 2014

A Stronger Dollar Is Bringing The Euro Closer To Even Value

The US Dollar has quietly been strengthening lately. As measured by the NYBOT Dollar Index, the USD has increased by 2.6% since the end of June and is at it's highest level since September 2013.

On a purchasing power parity basis the overvalued percentage of the Euro has dropped from 10.5% earlier this year to 4.2%. If the dollar continues to strengthen and thus the Euro weakens, this would mark a big change from the norm of the past 8 years. Over the past 8 years, the Euro has only dipped to undervalued three time with the longest duration at undervalued lasting only about 1 month.

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