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UBS expressed a positive outlook for the British pound (GBP), the Australian dollar (AUD) and the Swiss franc (CHF) within the G10 currency group. The financial services firm cited high interest rates and expectations of gradual monetary easing in the UK and Australia as reasons for its bullish stance on GBP and AUD.
UBS forecasts the rate and exchange rate to rise to 1.35 and 0.68, respectively. UBS’s view on the Swiss franc is also bullish due to the Swiss National Bank’s limited room to cut rates further.
The company predicts that interest rate differentials against other G10 currencies will narrow by 2025, which is likely to result in increased inflows into the CHF and a drop in the exchange rate to 0.84.
The Japanese yen (JPI) remains neutral from UBS’s perspective. While a short-term rise to 155 is seen as possible, especially if US bond yields rise, UBS forecasts a medium-term drop to 145 by the end of 2025.
This expectation is based on the current level of USD/JPI exceeding what yield differentials suggest, the expected contraction of the yield differential between the US and Japan, and political factors. In particular, President-elect Trump’s past criticism of a weak yen and Japanese policymakers’ lack of desire for further yen depreciation could lead to a mutually beneficial stronger yen.
In contrast, UBS has a less favorable view of the Chinese yuan (CNI), forecasting a rise to 7.50 by the end of 2025.
The projected increase is attributed to a potential escalation in trade tensions between the US and China and the expected appointment of Robert Lighthizer as US Trade Representative, who is known for his hawkish stance on trade with China. Despite the People’s Bank of China’s efforts to stabilize the yuan by managing its daily fixed rate, UBS warns of significant risks for further yuan depreciation.
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