The cheapest and most expensive currencies in the world right now, in one chart

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  • The Thai baht, New Zealand dollar and Brazilian real are currently the most overvalued currencies in the world, according to Deutsche Bank’s currency valuation models.
  • At the other end of the spectrum, the Turkish lira, Colombian peso and Swedish krona are deemed to be the cheapest.
  • Deutsche Bank says its valuation model has “significant predictive power for FX”.

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.

The full rankings based on capital and trade valuation metrics are shown in the chart below:

Deutsche Bank

So how do you read the chart?

In a nutshell, the further out from the centre the black line sits, the cheaper a currency is deemed to be, and vice versus.

The rankings are determined by combining Deutsche Bank’s capital-based and trade-based PPP (purchasing power parity) valuation models, something it says provides a more complete picture of valuations using weights that reflect the relative importance of capital and trade flows for each currency it monitors.

While the New Zealand dollar is currently deemed to be the most overvalued G10 currency based on the models, the US dollar isn’t far behind in fourth spot. The Australian dollar and euro are also deemed to be on the more expensive side of the ledger.

Outside of the Swedish krona, other majors currently deemed to be cheap include the Canadian dollar and British pound.

Deutsche Bank says its valuation model has “significant predictive power for FX, both in terms of directional accuracy and the magnitude of moves, especially over longer-term horizons”.

Something for investors and businesses out there to consider, especially those looking for a long-term sleeper trade.

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