Is the Dollar Overvalued? Different Views

Elliott R. Morss submits:

At the recent G-20 meetings, U.S. Treasury Secretary Geithner argued that the RMB was undervalued (read: USD overvalued). He said we need a better set of incentives to promote external sustainability and reduce the risk of the re-emergence of large trade and current account imbalances. He pushed for a set of indicative guidelines on appropriate currency valuations.

China did not buy it. Several journalists reported that the talks collapsed before the meetings had wrapped up. China does not like to be pushed around, and it wants to keep the dollar strong to support its exporters. So what do we know about USD values? Read on.

The Weakening USD

Since the U.S. started to run large trade deficits in the mid-'90s, the USD has weakened considerably. Table 1 provides data on how much value the dollar has lost against a number of currencies since 1995.

Table 1. US$ Value Loss,

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