New Delhi: Global investors holding excessive cash in US dollars may face increasing risks, and now might be the right time to consider shifting some of that money into other currencies or assets, according to a report by UBS. The report noted that the US dollar had been a popular choice in recent years due to strong US economic growth, high interest rates, and the strong performance of US stock markets. However, that trend is beginning to shift.
UBS believes the US dollar may lose some of its strength due to new market conditions, such as slowing growth in the US, changing interest rate expectations, and global shifts in capital flows. The report stated: “Given recent market developments, we believe it is timely to assess whether current US dollar allocations are above long-term targets, and to consider the potential benefits and risks of increasing exposure to home or alternative currencies.”
It further warned that if the dollar weakens, holding too much cash in it could reduce the value of investments—particularly for those with expenses in other currencies.
UBS suggested that investors should review their financial needs and future expenses to determine how much of their portfolio should remain in US dollars. For example, if investors need to pay for tuition, property, or business costs in another currency, it may be smarter to hold more money in that currency rather than converting it later when the dollar might be weaker.
The report emphasized: “Matching assets to future liabilities is one approach to managing risk and may help avoid conversions at less favorable exchange rates.”
UBS also offered ideas on where excess US dollar cash could be redirected. The euro is seen as one of the safest and most flexible alternatives. For those seeking stability, the Swiss franc and Japanese yen are considered safe-haven currencies, although they offer low returns.
For potentially higher returns, investors might explore currencies such as the Australian dollar or emerging market currencies like the Brazilian real or Mexican peso, though these come with greater risk. Gold was also recommended as a long-term safe asset, particularly during uncertain times.
In summary, UBS advises investors to act now—review their exposure to the US dollar and consider reallocating to other currencies or assets. Doing so could help protect their wealth from potential losses if the dollar weakens in the future.
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