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4 Feb 2015
EUR close to fair value – Nomura
FXStreet (Barcelona) - FX Strategists at Nomura, use PPP, REER and Interest rate differential based models to find out the valuation for the euro.
Key Quotes
“Our valuation models show that the Euro is close to fair value, with the averages slightly in undervalued territory.”
“The real effective exchange rate (REER) model shows a moderate undervaluation of 0–10% below the long-term historical average, depending on benchmarking period.”
“Interest rate differential-based models suggest a marginal undervaluation of - 1%.”
“PPP-based models, adjusted for GDP per capita and calibrated in a global sample of 41 countries, suggest a small overvaluation of around 6%.”
“The bottom line is that the Euro is close to fair value, or moderately undervalued, depending on the model. The Euro’s overvaluation, which was a puzzle during 2010- 2014, has been corrected. But the Euro is hardly a convincingly cheap currency at this point”
Key Quotes
“Our valuation models show that the Euro is close to fair value, with the averages slightly in undervalued territory.”
“The real effective exchange rate (REER) model shows a moderate undervaluation of 0–10% below the long-term historical average, depending on benchmarking period.”
“Interest rate differential-based models suggest a marginal undervaluation of - 1%.”
“PPP-based models, adjusted for GDP per capita and calibrated in a global sample of 41 countries, suggest a small overvaluation of around 6%.”
“The bottom line is that the Euro is close to fair value, or moderately undervalued, depending on the model. The Euro’s overvaluation, which was a puzzle during 2010- 2014, has been corrected. But the Euro is hardly a convincingly cheap currency at this point”