The US Dollar remains expensive

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Before it began its decent in early 2025, the US dollar as at its most expensive in a quarter of a century. As shown with the Real Effective Exchange Rate chart, the USD was more than 2 standard deviations expensive, a first since 1994.
While short term positioning can drive near-term volatility, the direction of travel is fairly clear here based on valuations, foreign repatriation (NIIP record negative) and deficits (internal and external).
This is the secular backdrop to keep in mind for longer term investors.

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