Why the US Dollar is Looking Cheap

Despite the relative strength of the US economy versus other developed countries, the Dollar Index has now returned to the average level of the last five years

M&G Investments 11 October, 2013 | 3:30PM

This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, M&G fixed income fund manager Mike Riddell explains why the dollar looks cheap against almost everything.

The US Dollar was strong through Q1 and Q2, but an interesting development in Q3 was that while the US Dollar held up OK against most emerging market currencies, it performed abysmally against other developed currencies. Below is a chart of the US Dollar Index, a gauge of US Dollar performance against a basket of major world currencies, where the basket contains EUR (57.6%) JPY (13.6%) GBP (11.9%) CAD (9.1%) SEK (4.2%) CHF (3.6%). The Dollar Index is back to where it was at the beginning of the year, and despite the relative strength of the US economy versus other developed countries, the Dollar Index has now returned to the average level of the last five years.

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M&G Investments  is a leading retail and institutional fund manager.

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