FX Valuation: Our 3 Metrics Point To Undervaluation In JPY, EUR - Deutsche Bank

Where is the agreement on all three valuation metrics (DBeer, FEER, PPP)?

The latest results for EM exchange rates for December point to overvaluation (in TWI terms) across all three approaches in CNY, and undervaluation in PLN, TRY and HUF. In G10, the December results point to undervaluation across the three approaches in JPY and EUR.

What are the latest results according to our preferred DBeer model?

Our preferred Behavioral Equilibrium Exchange Rate model (DBeer) suggests that the December exchange rate is significantly overvalued (in TWI terms) for CNY and BRL in EM. On the other hand, many EM currencies have undershot their DBeer equilibrium values, with MYR, TWD, PLN, TRY, HUF, ZAR, CLP, PEN, COP and MXN all significantly undervalued. In G10, CHF and USD are overvalued while GBP, JPY, CAD, EUR and SEK are undervalued.


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