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G Sachs: USD Highly Overvalued by 18%; USD Strength Unlikely to Sustain amid Recession
Despite the typical tendency of the USD to remain robust ahead of an impending recession, the strength of the currency is unlikely to sustain when the recession actually hits, repo...
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G Sachs: USD Highly Overvalued by 18%; USD Strength Unlikely to Sustain amid Recession
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Despite the typical tendency of the USD to remain robust ahead of an impending recession, the strength of the currency is unlikely to sustain when the recession actually hits, reported Goldman Sachs. The USD index notched a new peak in two years last Thursday, fueled by the market's growing expectation for a recession.

With reference to the period of 1999-2001, Goldman Sachs believed that, at the moment, the USD is highly overvalued by around 18%, highlighting that the U.S. economy during the said period had also faced similar conditions: declining growth stock valuations, aggressive interest rate hikes from the Federal Reserve and a robust USD.

The broker forecast that there are two possible outcomes for the trajectory of the USD in the coming few weeks. If the global economic growth outlook improves, the investors will switch to riskier investment assets, which would result in the weakening of USD. On other the hand, if a global economic recession is confirmed, the outlook of the currency would likewise be grim.

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