Is it time to short the dollar? UBS and others think so

Investment banks suggested trade ideas against the euro, British pound and Swiss franc.

The U.S. dollar has surged since September, but some financial institutions are suggesting investors should bet against further strength in the greenback. Investment bank UBS has taken a contrarian stance, warning investors not to chase the dollar's recent gains. "We caution against chasing USD strength; instead, we suggest selling dollar upside potential for yield pickup," said UBS Wealth Management strategists led by Dominic Schnider in a Dec. 2 note to clients.

"We say this from a backdrop of the dollar's extraordinarily rich valuation in trade-weighted terms." "This makes the USD a sell for us on any additional spikes, in our view, rather than adding to long positions. Put differently, we see value in a contrarian bias for most currency pairs," the bank's strategists added. London-based Longview Economics echoed this view, suggesting that investor optimism about the greenback might have reached unsustainable levels.

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