UBS Group AG’s wealthiest clients are still buying dollars even as the most popular trade in the foreign- exchange market has fallen out of favor, according to the world’s largest private bank.
UBS expects the Federal Reserve’s first interest-rate increase since 2006 to come in September after policy makers played down the significance of the economy’s slowdown in the first quarter, said Simon Smiles, Zurich-based chief investment officer for ultra-high-net-worth individuals. The Fed’s move would contrast with at least two dozen of its peers having eased monetary policy this year, led by the European Central Bank’s introduction of quantitative easing.
A gauge of the dollar has slumped 3 percent in April, halting a nine-month rally that propelled it to the highest on record. At the end of its two-day meeting on Wednesday, the Fed provided little insight on when it plans to raise borrowing costs after the world’s largest economy barely grew in the first quarter.
“There is still a lot of love for the dollar amongst the clients I speak to,” Smiles said in an e-mail interview Wednesday. “We are not changing our tactical overweight on the dollar despite the weak U.S. GDP data.”
UBS is advising clients to hold higher weightings in the dollar than recommended by the benchmark indexes they follow as the greenback is likely to strengthen to $1.02 versus the euro in the next three months, Smiles said.
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