USD to remain under pressure, how to manage this decline? – UBS

The US currency has come under renewed pressure, falling 2% in March. Economists at UBS expect the US currency to remain under pressure and advise investors to consider various steps to manage this decline.

Investors can add Gold to portfolios

“We believe the main pillars of US Dollar strength last year-aggressive tightening by the Federal Reserve and a resilient US economy-are unlikely to support the currency going forward.”

“Non-USD investors should strengthen their home bias with a currency hedge or asset shift. This is a natural move for non-USD based investors who have accumulated large savings in the dollar and face the risk of depreciation.”

“Investors should also consider increasing exposure to select G10 currencies. We have the AUD as our most preferred currency, which we expect to benefit from China's recovery. We also see upside for the JPY and the CHF, as both countries benefit from low inflation. We also favor a select basket of emerging market currencies for carry.”

“Investors can add Gold to portfolios. The Gold price measured in USD tends to rise when the Dollar falls on a trade-weighted basis and when US interest rates are declining.”