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22.01.2019 01:06 PM
How much is the dollar overvalued or does it still have room to grow?

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The dollar was at a level of almost three weeks high on Tuesday, investors are attracted by the relative safety of the US currency after the International Monetary Fund reduced its forecasts for the global economy in 2019 and 2020.

However, despite the confident start of the year, there is a reason to believe that the dollar may be overvalued against the background of weaker competitors, and if the European Central Bank signals a hardening of monetary policy, the situation may change dramatically. In addition, the dollar may also be under pressure due to problems associated with the closure of the US government, which is already beginning to put pressure on domestic growth. Morgan Stanley expects the US economy to grow in the first quarter is likely to fall below their forecast - 2.2 percent year on year, which is about half as much as 4.2 percent in 2018. The IMF has reduced its growth forecasts for 2019 and 2020 due to weakness in Europe and in some emerging markets. He also said that the inability to resolve trade conflicts could further destabilize the world economy.

While the dollar feels very good. External factors that have a direct impact on the foreign exchange market are currently very unstable. It is difficult to predict how the next round of negotiations between the US and China will end, will it be a reason for a summit meeting and how will it be? How will consumers and producers in Europe, especially exporters, behave? What will show data on corporate profits in the US? Too many questions and the answer to each of them can cause the dollar to fall.

Irina Maksimova,
Analytical expert of InstaForex
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