CRU: FX in 2020—RMB Stable, Real and Rouble to Strengthen

By CRU Chief Economist Jumana Saleheen, from the Steel Sheet Products Market Outlook

There is widespread agreement that the dollar is overvalued by around 10 percent. CRU expects the trade weighted dollar (TW$) to remain overvalued and broadly stable for the rest of 2020, as pandemic uncertainty continues to support the dollar as a “safe-haven” currency. The stability of the TW$, however, hides important changes in bilateral currencies: the RMB is forecast to remain stable for the rest of the year while the Russian rouble and Brazilian real gain 3 percent and 5 percent, respectively, against the dollar. We expect the TW$ to fall materially between 2021 and 2024, returning it to fair value as pandemic uncertainty fades and fundamental forces reassert themselves.