“We continue to expect a dollar bounce in case of a Trump victory. However, we don’t see Trump as outright USD-positive over the medium term and therefore advise selling stronger dollar-rallies,” UBS said in a note on Friday.
The call comes as the U.S. election, just over two weeks away, remains too close to call, though Trump has gained ground in recent weeks and now has a slim lead over Vice President Kamala Harris in some polls.
The recent dollar rally has been attributed in part to the market pricing in a higher likelihood of a Trump victory, with the greenback seen as one of the so-called Trump-trades that have gained traction.
The boost to the dollar from the “Trump-trades” may prove fleeting, UBS says, forecasting the euro-dollar to move toward 1.16 in 2025, suggesting limited upside for the greenback over the longer term.
In the broader currency market, meanwhile, some emerging market currencies, which have struggled in the recent weeks against the dollar, are likely to remain in favor.
“We think the South African rand, supported by a more reform-minded government, and the Mexican peso, which already prices in a hefty risk premium for political turmoil, are good options to collect carry over the medium term,” UBS said.
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