UBS analyst sees outperforming USD ahead

Mansoor Mohi-uddin, chief foreign exchange strategist at UBS, said while the sudden sell-offs in asset markets, carry trades and emerging market currencies were helping the yen and the Swiss franc to regain lost ground, investors should be aware that the dollar would benefit from safe haven seeking flows as well.

He said since global equity markets started rallying in 2003, the dollar had weakened as US investors bought foreign equities, emerging market currencies and commodities. “Increased risk aversion now will halt such flows while encouraging US investors to repatriate funds to cover losses in domestic markets,” Mr Mohi-uddin said.

“If risk aversion continues to drive financial markets lower then investors should expect the dollar along with the yen to outperform.”

Source: Ft.com