UBS - "Mansoor Mohi-uddin, Managing Director Head, Foreign Exchange Strategy at UBS Macro Research:
- During the course of this year our bullish view on the dollar has become more consensus as the Federal Reserve appears likely to be the first of the major central banks to exit unconventional monetary policy.
- But not all investors are long the greenback. American fund managers - the largest holders of dollar- denominated capital in the world - continue to have historically high levels of foreign assets in their portfolios as the latest data on US mutual fund allocations show.
- Any rotation back towards domestic markets in future by US fund managers will provide further support for the greenback, and reinforce our view that the dollar will rise to 1.20 and 110 against the euro and yen This year our bullish view on the dollar has become more consensus as the Federal Reserve looks likely to be the first of the major central banks to exit unconventional monetary policy. But not all investors are long the greenback. respectively.
(...) July's US employment report disappointed expectations. But the Fed is still more likely than not to announce in September that asset purchases will be tapered from Q4'13."