Nonsense. The *only* place to look to see if a currency is properly valued is the current balance of trade.
If you import more than you export, then your currency is overvalued. If you export more than you import, then your currency is undervalued.
That's it. That's the test. That's what the "free market" examines when valuing currencies.
Of course, the "free market" can be manipulated by foreign government intervention...creating temporary distortions, but in the end the Market always prevails.
That's it. That's the test. That's what the "free market" examines when valuing currencies.
That's your test, and there is no factual basis to it. I just got through reading a Federal Reserve study that looked at 25 countries that corrected account deficits. The link to it is here.
http://www.federalreserve.gov/pubs/ifdp/2000/692/default.htm
South, come on. You really believe this? Do you have a source for this belief or did you come up with it on your own?