UBS - "The dollar remains our favoured currency for 2013. The US economy is likely to expand more than its peers. The Federal Reserve is set to exit uncoventional monetary policy before other major central banks. Dollar diversification by central bank reserve managers and sovereign wealth funds is subdued, and America's shale energy revolution is cutting its current account deficit. Our bullish view on the greenback has become more consensus now. But if the dollar does embark on a multi-year…

UBS - "This year the dollar is leading the other major currencies. But on a broad trade-weighted basis, including emerging market and commodity currencies, the greenback remains close to its all-time lows.

Dollar bulls - looking for a multi-year greenback rally like those of 1978-1985 and 1995-2002 - are anticipating the Federal Reserve will start scaling back its quantitative easing this year. That appears the most likely trigger for a broader dollar recovery in 2013.

But for a big…

UBS - "This week's key points for currencies are:

- upcoming FOMC forecast round key for dollar strength

- ECB inaction to support euro on the crosses

- the new BoJ won't disppoint USDJPY bulls

- MPC waits for Budget BoE review, stay short Cable

- SNB to stay on hold in the week ahead, watch USDCHF

- Norges Bank also to remain unchanged next week

- Australian jobs, RBNZ meeting should temper AUDNZD rally"

Mansoor Mohi-uddin, Managing Director &…

UBS - "The pound, like the yen recently, is undergoing a sharp devaluation against the other major currencies. Late on Friday, Moody's stripped the UK of its AAA rating citing continued weakness in Britain's medium term growth outlook. We remain bearish sterling and expect Cable to trade in a lower 1.40-1.50 range over the next couple of months.

Financial markets are set for a challenging week. (...) This week's key points for currencies are:

- Bernanke to be dovish but Fed hawks…

UBS - "Sterling is likely to be the next major currency that depreciates strongly. This follows the plunge of the yen over the last few months. As central banks tolerate higher levels of inflation, the pound is set to weaken further across the board particularly against our favourite G4 currency, the US dollar. This week's key points are:

- watch FOMC minutes for signs of Fed easing fatigue

- Italian elections key for euro in the week ahead

- forget G20, Abe's BoJ choice to…

UBS - "This week's key points for currencies are:

- dollar bears note FOMC has hawks as well as doves

- euro supported for now on global risk sentiment

- USDJPY still a buy on dips into January's BoJ meeting

- UK CPI, retail sales key in the week ahead for sterling

- EURCHF plays catch up at last with euro crosses

- expect NOKSEK to be bid as Swedish data stays mixed

- watch Australia's employment data in the week ahead"

Mansoor Mohi-uddin, Managing…

UBS - "This week's key points are:
- Fed doves unlikely to weaken the dollar now
- ECB meeting key for euro in the week ahead
- BoJ to agree higher inflation target this month
- MPC meeting unlikely to provide direction to sterling
- upcoming Swiss CPI data focus for franc
- follow Riksbank minutes in the week ahead"
Mansoor Mohi-uddin, Managing Director and Head of Foreign Exchange Strategy at UBS Macro Research

UBS - "(...) The Fed's new policies are likely to keep the dollar constrained as the new year starts but will support the currency in 2013 as the US economy keeps recovering. That means the greenback is likely to stay at current levels of 1.30-1.32 against the euro for now but recover back to 1.15-1.20 next year.

(...) In our last comment here for 2012, the key points for currencies are:

- new Fed policies tempering dollar for now, to bolster it later

- ECB watchers should…

UBS - "This week we visited clients in Saudi Arabia, Kuwait, Qatar and Abu Dhabi. Middle East accounts remain cautious on the euro, have little interest in sterling and believe the yen may weaken. Thus they continue to be overweight dollars. This is partly a reflection of increased social spending since the Arab Spring began, reducing accumulated foreign reserves. But it also reflects ongoing concern about the Eurozone debt crisis. In short, the region's clients largely share our underlying…

UBS - "The fiscal cliff is a collection of spending cuts, tax hikes and unemployment benefit restrictions that will begin at the start of January. The budgetary reductions total a savage $600bn or 4% of GDP. If America's politicians are unable to agree on alternative fiscal policies by December 31, the shock to the economy would tip the US back into recession. It would also trigger ratings downgrades while inducing the Federal Reserve to ramp up its third round of quantitative easing. In…

Thomson Reuters Probes FX Trading Breach

by Dow Jones Newswires

The electronic currencies-dealing unit of Thomson Reuters (TRI) is investigating whether one of its high-speed trading clients, Lucid Markets, broke its rules to gain an unfair advantage in foreign-exchange markets.

According to a document seen by…

Forex Trading Slowed, But Not Stopped, by Sandy

With many New York banks’ foreign-exchange desks expected to be thinly staffed Monday as Hurricane Sandy bears down on the city, their colleagues in London and elsewhere are preparing for a larger work-load. Katie Martin reports on Markets Hub.

But forex players don’t have quite the same…

UBS - "The risk of the Fed raising its bond purchases further towards year end remains a threat to the dollar. But given other central banks are easing policy or likely to do so in Q4'12, we don't want to chase the greenback lower from current levels. Instead we prefer the yen as a funding currency amongst the majors and the Swiss franc as a funding currency in Europe. Moreover, we think the Australian dollar amongst commodity currencies remains at risk from renewed easing by the RBA and…

UBS - This week's key points are:

- payrolls key in the week ahead for dollar

- ECB rate decision and press conference to cap euro

- Japanese data increases pressure on BoJ again

- stay wary of Cable as BoE meets in the week ahead

- no change from SNB franc policy one year on

- remain long NOKSEK ahead of Riksbank meeting

- Australian dollar increasingly resembles Cable in 2007



by Mansoor Mohi-uddin, Managing Director and Head,…

What a great way to summarize the current Forex market situation in just a few sentences... Two thumbs up for Mr. Mansoor Mohi-uddin!:

"Our core foreign exchange views - favouring the safe-haven dollar against the euro and pound, sceptical on excessive commodity currency strength, highlighting Nordic currencies and expecting the Swiss franc cap to hold - have worked out this year when investors have feared major shocks hitting the global economy particularly out of the Eurozone.…

Currency Trading at $5 Trillion a Day Surpassed Pre-Lehman High, BIS Says

By Anchalee Worrachate and David Goodman at Bloomberg

Currency trading may have risen to a record $5 trillion a day in September, surpassing the peak reached before Lehman Brothers (LEHMQ) Holdings Inc.’s collapse in 2008, according to the…

UBS trims Zurich FX team

By Financial News

UBS, the world's third largest FX dealer, has made two currency strategists at its Zurich head office redundant, as the Swiss giant continues to streamline its investment banking operations.

Manuel Olivieri and Taso Anastasiou, both Zurich-based foreign exchange strategists at UBS, have been let go by the Swiss bank,…

UBS Gaining Market Share In Currency Trading

Dow Jones Newswires

ZURICH -- As it is moving towards conducting more flow business on behalf of clients, UBS AG (UBS) is gaining market share in currency trading, Tom Naratil, chief financial officer at Switzerland's largest bank, said Tuesday.

"We continue to see that our algorithmic trading…

Technology Buoys Retail Currency Trading, Reshapes Old Models

By Eva Szalay Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Retail foreign-exchange trading is emerging as one of the biggest growth areas in the currencies space, and some of the trading firms that facilitate these flows are building up a whole new business model.

Traditionally, the model was simple: big…