UBS Cuts Dollar Forecast on Risk Appetite, Stock Gain

By Ron Harui

Sept. 9 (Bloomberg) -- UBS AG, the world’s second-largest currency trader, lowered its forecasts for the dollar against currencies such as the euro and the pound, citing improving risk appetite and gains in stocks.

The dollar will weaken to $1.45 per euro in a month, compared with a previous forecast of $1.40, and it will fall to $1.63 per pound, versus an earlier prediction of $1.57, Mansoor Mohi-uddin, chief currency strategist at UBS in Zurich, wrote in a research note today.

UBS predicts Australia’s dollar will rise to 88 U.S. cents in one month, compared with an earlier prediction of 80 cents, and New Zealand’s dollar to climb to 71 cents, from an earlier forecast of 65 cents. Canada’s dollar will strengthen to C$1.05 per U.S. dollar in one month, versus C$1.15 previously, UBS said.

“The combination of risk-seeking U.S. investors diversifying their portfolios and equities rallying further will keep the U.S. dollar weak near term,” Mohi-uddin wrote. “We lower our one- and three-month forecasts for the greenback.”

The dollar declined to $1.4497 per euro as of 11:31 a.m. in Tokyo from $1.4478 in New York yesterday, when it dropped to $1.4535, the lowest level since Dec. 18. The greenback fell to $1.6527 per pound from $1.6490, after reaching $1.6587 yesterday, the weakest since Aug. 21. The U.S. currency traded at C$1.0774 from C$1.0784.

The Australian dollar traded at 86.05 U.S. cents from 86.16 cents yesterday and the New Zealand dollar advanced to 69.67 cents from 69.61 cents.

Stock Gains

The MSCI World Index of stocks has gained 60 percent since falling to a 13-year low on March 9. It has risen 1 percent this month after a 3.9 percent increase in August and an 8.4 percent advance in July.

The dollar has fallen against all of the 16 major currencies this week after finance ministers and central bankers from the Group of 20 nations pledged on Sept. 5 to maintain efforts to pull the global economy out of recession.

“The greenback has weakened following the G-20 meeting as policy makers made it clear that they remain reluctant to tighten,” Mohi-uddin wrote.

UBS kept its one- and three-month forecasts for the dollar against the yen unchanged at 95, citing “rising risk seeking behavior” supporting the dollar-yen exchange rate.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.