Dollar vulnerable to correction, Pictet Paolini says

  • by Ahmed Mamdouh
  • September 11, 2018, 2:41 AM
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Luca Paolini, chief strategist at Pictet Asset Management, gave an important note on Friday that can benefit all traders who are currently shorting the U.S. dollar.

The green currency is overbought and “vulnerable to a correction,” Paolini mentioned adding that currency risk reversals point to weakening dollar strength against the yen over three months.

Meanwhile, the greenback is trading 11 percent above its 10-year REER average in July after climbing to the highest level since 2002 last year, according to the International Monetary Fund.

The REER is real effective exchange rate that measures the weighted average of a country's currency in relation to an index or basket of other major currencies, adjusted for the effects of inflation.

Paolini sees that the dollar is “as richly valued as it’s been for at least a quarter of a century,” and it should start to retreat.

However, some investors are still worried of the non-stop trade conflict between the U.S. and China over tariffs, which has been a key trigger to the greenback over the recent period.

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