The Swiss banking giant advises investors to use the dollar’s temporary strength to diversify, citing expected Fed rate cuts and a slowing U.S. economy.
ZURICH – Global investment bank UBS is forecasting a significant shift in currency markets, predicting the U.S. dollar will weaken in the second half of 2024 and presenting a window of opportunity for investors.
In a report released Monday, the Swiss banking giant characterized the dollar’s recent rebound in July as a temporary phase. The bank recommends that investors can use this period of strength to strategically position themselves for the expected decline by reducing or hedging their U.S. dollar exposure.
The core of UBS’s forecast is the anticipation of a gradual slowdown in the U.S. economy, which is expected to prompt the Federal Reserve to begin cutting interest rates later this year. This policy shift would likely reduce the dollar’s appeal relative to other currencies.
Highlighting specific opportunities, UBS favors several currencies against the greenback. The bank identified the euro as “the prime default option for investors wishing to move out of the USD,” citing its high liquidity and market depth. The report also pointed to the Australian dollar and the Norwegian krone as attractive alternatives.
Beyond the major currencies, UBS sees potential in emerging market currencies, including the Mexican peso, South African rand, and Israeli shekel.
Adding to the positive outlook for investors looking to diversify, the bank noted that overall currency volatility has “normalized” after peaking in April, suggesting a more stable environment for making strategic currency moves. This forecast provides a clear roadmap for investors looking to capitalize on shifting global economic tides.
