UBS Issues Currency Warning to UK Investors Amid US Dollar Volatility

Investors urged to rethink US dollar exposure as geopolitical risks mount

UBS Advises UK Investors to Reassess US Dollar Holdings

As global markets face fresh volatility, UBS has issued guidance to UK investors with exposure to the US dollar, urging them to review their currency positions in light of recent developments.

Uncertainty stemming from US economic policy changes and President Donald Trump’s return to office has contributed to fluctuations across currency and equity markets. This has had a notable impact on the performance of the US dollar against major currencies including the British pound.

US Dollar Faces Pressure Amid Policy Uncertainty

UBS analysts noted that while the US dollar has long served as a safe-haven currency, this status is now being questioned due to:

• Policy unpredictability in Washington
• Widening trade and budget deficits
• Reduced global confidence in US fiscal leadership

These factors have driven investors to reduce their US exposure, while European stocks and non-USD currencies have started to outperform.

GBP/USD Swings Highlight Market Instability

The British pound has experienced wide swings against the US dollar in 2025. Starting the year at around $1.25, it fell to near $1.20, before rebounding strongly to approximately $1.35.

These movements underline the potential risks for UK investors holding significant USD reserves, particularly if those holdings are meant to fund sterling-denominated expenses.

UBS Recommendations: Diversify and Strategise

UBS suggests that UK investors should:

• Reassess their USD allocations, especially if converting back to GBP in the near term
• Avoid exchanging USD at poor rates by implementing currency hedging strategies
• Consider diversifying into other currencies with stronger outlooks

For growth-seeking investors, UBS recommends cyclical currencies such as the:

• Australian dollar (AUD)
• New Zealand dollar (NZD)
• Swedish krona (SEK)
• Norwegian krone (NOK)
• British pound (GBP)

However, UBS cautions that these currencies tend to be more volatile.

Safe-Haven Alternatives and Gold as a Hedge

For more conservative investors, traditional safe-haven currencies like the Swiss franc (CHF) and Japanese yen (JPY) are still considered viable, especially during periods of heightened global risk.

UBS also points to gold as a potential hedge against both geopolitical instability and inflation. Although it offers no yield, gold has historically maintained value in uncertain times.

Final Thoughts: Time for a Currency Check-Up

With ongoing turbulence in the US economy and fluctuating currency markets, now is a crucial moment for UK investors to reassess their US dollar exposure.

UBS’s advice is clear: don't assume the dollar is always safe. A proactive approach to currency diversification could protect portfolios and improve returns in an increasingly unpredictable global environment.

Sources: (Investing.com, Reuters)