UBS prefers British pounds, Australian dollars, and Swiss francs; Neutral on JPY, Bearish on CNY by Investing.com

UBS expressed positive forecasts on the British Pound (GBP), Australian Dollar (AUD) and Swiss Franc (CHF) within the G10 currency group. The financial services company cited rising interest rates and expectations of gradual monetary easing in the UK and Australia as reasons for its positive outlook on sterling and the Australian dollar.

UBS expects exchange rates to rise to 1.35 and 0.68, respectively. UBS’s stance on the Swiss franc is also optimistic given the Swiss National Bank’s limited scope to cut interest rates further.

The company expects that interest rate differentials with other G10 currencies will narrow by 2025, likely leading to increased flows into the Swiss franc and a fall in the exchange rate to 0.84.

The Japanese Yen (JPY) maintains a neutral stance from UBS’s point of view. Although a short-term increase towards 155 is considered possible, especially if US bond yields rise, UBS expects a medium-term decline to 145 by the end of 2025.

This forecast is based on the current level of USD/JPY exceeding what the yield spreads indicate, the expected contraction in the yield spread between the US and Japan, and political factors. It is worth noting that President-elect Trump’s past criticism of the weak yen and Japanese policymakers’ lack of desire to devalue the yen further could lead to a stronger yen in a mutually beneficial way.

Conversely, UBS holds a less positive view on the Chinese yuan, and expects the exchange rate to rise to 7.50 by the end of 2025.

The expected increase is due to the potential escalation in trade tensions between the United States and China and the expected appointment of Robert Lighthizer as US Trade Representative, known for his tough stance on trade with China. Despite the People’s Bank of China’s efforts to stabilize the yuan by managing the daily stabilization rate, UBS warns of significant risks of further depreciation of the yuan.

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