Dollar to Advance Against Euro, Aussie, Kiwi Dollars, UBS Says

By Candice Zachariahs

Oct. 13 (Bloomberg) -- The U.S. dollar will strengthen against the euro and commodity-backed currencies by less than previously estimated over the next three months, UBS AG said, revising earlier forecasts.

The greenback, which has dropped against all 16 of its most-active counterparts this year, will rise to $1.40 against the euro in three months from $1.4790 as of 8:59 a.m. in Tokyo, the bank said. The Australian dollar will trade at 80 U.S. cents, Canada’s loonie at C$1.12 and New Zealand’s kiwi at 65 cents, UBS said. The Swiss franc will fetch 1.09 per dollar, it said.

“We remain skeptical about U.S. dollar weakness given how much equities have rallied already this year,” wrote a team of UBS analysts led by Zurich-based Mansoor Mohi-uddin, chief currency strategist at UBS. The forecast changes over three months “reflect the likelihood that the U.S. dollar will keep trading in a $1.40 to $1.50 range as we head into year end.”

The Canadian currency climbed to its highest since September 2008 yesterday and bought C$1.0318. Australia’s currency rose to 90.84 U.S. cents, after touching the strongest in 14 months and New Zealand’s dollar gained to 73.82 cents.

UBS earlier forecast the euro would buy $1.35 in three months, with the Australian and New Zealand currencies trading at 75 cents and 60 cents.

One dollar would buy C$1.18 and 1.13 Swiss francs respectively, it had said.

Commodity Currencies

The commodity-backed currencies of Australia, New Zealand and Canada, along with the Brazilian real, South African rand and Norwegian krone, have been the biggest gainers against the greenback this year as traders bet on assets that would benefit from a global recovery. Prices of commodities have climbed 16 percent this year, as investors sought hedges against inflation amid concerns about a widening U.S. budget deficit and record- low interest rates.

“The commodity bloc has strengthened sharply over the last few weeks as the global recovery continues,” wrote the analysts. “But we remain wary of chasing these currencies given all the good news that is priced into them.”

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