Pictet's Cole: History suggests dollar could depreciate by up to 30% in coming years

The biggest issue looming over the horizon as we head into the New Year might be an impending shift in the relative valuation of the dollar, according to Pictet AM's Andrew Cole.

Its recent ascent has served to attract investment capital away from other asset classes, putting pressure on investments in emerging markets, for example. But we now find ourselves at a crossroads with an end imminent to the US's zero interest rate policy that was put in place after the financial crisis. It is this prospect of higher rates in the US that lies behind much of the US dollar's toppy valuation. By our calculations, the US dollar's ascent has left the currency trading at levels that are some 25%-30% above fair value. Over the past 30 years, it has only ever hit this level ...