BLBG: Euro May Decline a Further 5% as Global Trade Slumps, UBS Says
Investors should sell the euro against the dollar because it may fall 5 percent as global trade declines and a “risk premium” weighs on the 16-nation currency, UBS AG said.
The euro may drop to $1.25 in three months, the world’s second-biggest foreign currency trader said in a research note dated Jan. 26. Investors should exit the trade if the currency strengthens to $1.3450.
“In Europe, weak activity and the limited ability from officials to react on current risk events is putting a premium on the single currency,” UBS said.
The euro slipped 0.2 percent to $1.3162 as of 10:05 a.m. in Tokyo from $1.3189 yesterday. It has fallen 5.8 percent this year.
European economies including Germany, Belgium, Switzerland and Sweden will be hurt as U.S. savings rise and the nation’s imports fall, UBS said.
“A narrowing U.S. current account is hurting exporters and their currencies,” the bank said in the research note.
The European Commission on Jan. 19 estimated the 16-nation economy will shrink 1.9 percent this year.
