No, we’re still not there yet. The dollar is still sinking.
So far today, the dollar index, which tracks the currency against a basket of peers, has nudged to fresh lows at 93.81 – its lowest point since June last year.
In an update to its house view, Deutsche Bank writes today that there are signs of a ‘top’ forming for the dollar in what is a mature bull cycle for markets. In previous dollar tops, notably in 1985 and 2002, “the currency’s initial downward slide was sharp”, it warns. But it adds:
However, conditions are not in place for a sharp dollar devaluation this time around, at least not yet. Dollar tops are typically signalled by valuation extremes, but dollar hasn’t exceeded +20% overvaluation band. The US current account is stable, owing to better energy balances – whereas generally it worsens by 1.5pp of GDP in the 2 years before a peak. Dollar interest rates are typically falling on G10 ranking tables in a dollar downcycle – this is not the case at the moment.
Nonetheless, it thinks the euro will reach $1.20 by 2018. It’s now at $1.1650.
Chart via Bloomberg