Investing.com — UBS World Analysis maintains a bullish outlook on the ‘s continued dominance because the world’s main reserve foreign money. Regardless of rising considerations about its sustainability, analysts say that a number of elements will underpin the buck’s preeminent place for years to come back.
Whereas flagging the potential for a extra diversified foreign money panorama, UBS highlights the greenback’s deep liquidity, stability, and the stickiness of world foreign money regimes. Gold is recognized as a key diversifier, with central financial institution shopping for and different elements anticipated to drive its worth greater.
As per UBS World Analysis, the US greenback will stay the cornerstone of the worldwide financial system for the foreseeable future. This assertion is grounded in a number of key elements:
Sticky World Foreign money Regimes: Historic priority means that shifts in dominant currencies happen progressively. Regardless of financial and political modifications, the US greenback has maintained its reserve foreign money standing.
Unparalleled Liquidity: The greenback’s dominance in international commerce, funds, and derivatives markets supplies it with an unmatched stage of liquidity, a crucial attribute for reserve managers.
Stability and Security: Whereas acknowledging the US’s home challenges, analysts say that the nation nonetheless ranks extremely in institutional power indicators reminiscent of rule of regulation and market openness. The US’s place as a number one technological innovator additional bolsters its attraction.
Whereas the US greenback’s dominance is predicted to persist, UBS mentions the rising pressures for a extra diversified foreign money system. The rise of geopolitical tensions, coupled with efforts by nations like China to internationalize the yuan, are contributing to this development.
“All in all, we predict the greenback’s reign will stay on. On the identical time, it is going to doubtless make some room for rivals alongside the best way,” the analysts mentioned.
Nevertheless, the brokerage believes these initiatives are nonetheless of their early phases and are unlikely to pose a major problem to the greenback’s supremacy within the close to time period.
UBS flags gold as a key asset for traders searching for to diversify away from the US greenback. Elements reminiscent of elevated central financial institution shopping for, decrease US rates of interest, and recovering ETF demand are anticipated to drive the gold worth to $2,600/oz by year-end. The brokerage additionally emphasizes gold’s function as a hedge in opposition to geopolitical dangers, fiscal considerations, and inflation.
Extra Issues
Swiss Franc: UBS recommends the Swiss franc as a substitute for the US greenback, citing the Swiss Nationwide Financial institution’s restrictive financial coverage and the foreign money’s safe-haven attraction.
Geopolitical Dangers: Whereas not instantly threatening the greenback’s dominance, rising geopolitical tensions might speed up the shift in the direction of a multi-polar foreign money system.
