The Thai baht, New Zealand dollar and Brazilian real are currently the most overvalued currencies in the world right now, with the Turkish lira, Colombian peso and Swedish krona the cheapest, according to Deutsche Bank’s currency valuation models in January.
Deutsche Bank says lira, Columbian peso among cheapest currencies
The Turkish lira, Columbian peso and Swedish krona are the cheapest currencies in the world, according to calculations by Deutsche Bank.
The valuation model has “significant predictive power” for foreign exchange prices, the German bank said, according to a report by news and research portal Business Insider on Monday.
The currencies were assessed by combining Deutsche Bank’s capital-based and trade-based purchasing power parity valuation methods, which it claims better reflect a currency’s value than more traditional approaches.
Some investors are looking to emerging markets to increase their profits after the U.S. Federal Reserve signaled it was slowing the pace of interest rate increases. Lower U.S. interest rates make the currencies of riskier emerging markets more attractive in terms of price.
Other major currencies seen as cheap included the Canadian dollar and British pound, while the most expensive were the Thai baht, the New Zealand dollar and the Brazilian real, according to Deutsche Bank.
The valuation model is noteworthy “both in terms of directional accuracy and the magnitude of moves, especially over longer-term horizons”, Deutsche Bank said, according to Business Insider.