Bank of America predicts increased pressure on the US dollar

Bank of America notes the resumption of the bearish trend for the US dollar after a sharp negative revision of employment data in early August.

The bank's currency indicator has moved into a «bearish» zone, and option indicators indicate a possible further weakening of the dollar against the pound sterling, the Swedish krona and the South African rand. A slight deterioration in macroeconomic indicators also reinforces the negative outlook.

According to BofA, investors actively opened short positions in the dollar ahead of the publication of the US consumer price index. Since the CPI data coincided with forecasts, and core commodity inflation remains moderate, the bank expects the downward trend of the US currency to continue.

The cost factor also speaks against the dollar: in the G10 BofA model, the Australian and New Zealand dollars look undervalued, and the Swiss franc is the most overvalued.

In emerging markets, the bank highlights undervalued currencies: the Indian rupee, the Chilean peso, the Indonesian rupiah and the South Korean won. On the contrary, the Taiwanese dollar, the Israeli shekel and the Polish zloty are considered overvalued.