Sell Euro as U.S. Financial Rescue May Boost Dollar, UBS Says

By Candice Zachariahs

Sept. 26 (Bloomberg) -- Investors should sell the euro against the U.S. dollar as the risk of recession spreads to Europe and global central banks and sovereign wealth funds buy Treasuries, UBS AG said.

An industry survey showed Sept. 24 that business confidence in Germany, the euro region's largest economy, fell to the weakest level in three years. The U.S. government is working on a $700 billion bailout package for banks to stabilize money markets and jumpstart the economy.

``We expect the dollar to gain more support upon a successful vote on the bailout package,'' wrote Stamford-based Brian Kim, a currency strategist at UBS AG, in a research note dated Sept. 25. ``Continuing foreign central bank demand for Treasuries will be dollar-supportive.''

Kim advises selling the euro at $1.4655 with a target of $1.4250. Investors should exit the bet if the currency rises to $1.4890, said UBS, the world's second-biggest currency trader. The dollar traded at $1.4671 per euro at 9:36 a.m. in Tokyo from 1.4609 yesterday.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net