Room for USD strength to reverse further after it became more extreme last year – MUFG

USD peak in place? The longest and second-largest US Dollar bull run may be ending, according to analysts at MUFG Bank.

USD strength became more extreme last year

“USD strength became more extreme last year. The USD reached its highest level against our equally-weighted basket of other G10 currencies since the early 2000’s. At the peak in October, the USD was over 2 standard deviations stronger than the average over the last 40 years.”

“Similar extreme levels of USD overvaluation were last recorded in the early 2000’s and mid-1980’s and subsequently proved to be long-term bearish turning points for the USD. On both occasions, the USD then fell by around 40%. In comparison, the USD has declined so far by around 8% since the peak in October thereby leaving room for the adjustment lower to extend further in the coming years.”