Sterling is the most undervalued currency trading against the dollar, according to Daragh Maher, FX strategist at Calyon.Speaking to the Financial Times, he posited that the pound is undervalued using both an economic equilibrium approach and purchasing power parity comparisons, and is likely to depreciate further in the coming weeks.However, this persistent underselling could result in a sharp upswing when sentiment towards the pound lifts, as forex traders will rush to try to cover their positions."Policy stimulus is helping drive a recovery in the UK. The catalyst for a re-think on sterling is already evident with early signs of improvement in the economic cycle and the financial sector," said Mr Maher, expressing his confidence in an uptick in the value of the pound.This morning (August 4th), sterling was little changed against the dollar, with the greenback stable after slumping to its lowest point of the year on renewed confidence in global economic recovery and a concomitant growth in appetites for risk.