Investing.com — The US greenback has surged to two-year highs following the current US presidential election, reversing from its prior lows simply two months in the past.
Whereas the present power of the buck seems sturdy and market situations stay favorable, strategists at UBS warning that it could not current a compelling purchase alternative for traders.
The fast rebound of the greenback has been pushed by stronger US financial information in comparison with different areas and heightened considerations over international progress. The greenback’s trajectory was additional bolstered by the re-election of Donald Trump, which decreased the probability of serious US charge cuts.
This, coupled with international GDP progress uncertainty, US tariff threats, and US yields staying “greater for longer,” implies that the foreign money’s power could persist heading into 2025. Nonetheless, “it doesn’t essentially make the greenback a purchase,” UBS strategists led by Dominic Schnider stated.
The greenback has skilled a 6% rebound within the from its September low, a transfer equal to roughly one customary deviation. Strategists spotlight that a lot of the optimistic information supporting the greenback seems to have already been factored into the market. In consequence, they advise towards pursuing additional greenback power at this stage.
The staff additionally factors to the restricted sustainability of the greenback’s present valuation, citing its “terribly wealthy valuation in trade-weighted phrases.”
“This makes the USD a promote for us on any further spikes, in our view, somewhat than including to lengthy positions. Put in a different way, we see worth in a contrarian bias for many foreign money pairs,” strategists stated.
On this context, the financial institution advocates for contrarian methods, favoring currencies just like the and , which may benefit from diverging financial insurance policies. Inside Europe, the British emerges as UBS’s high decide, supported by higher UK progress prospects and better yields.
Rising market currencies additionally provide choose alternatives. UBS identifies the South African , , and as enticing for whole returns, though commerce dangers stay an element for export-oriented currencies just like the and .
Trying forward, UBS foresees a 6% decline within the broad DXY over the medium time period, pushed by easing US yields and the diminishing advantages of Trump’s preliminary financial insurance policies.
