UBS AG (UBS) favors the U.S dollar among G-3 currencies this year as the world's biggest economy is picking up, though Tuesday's decision on a bailout package for Greece will give the euro a temporary boost, according to Mansoor Mohi-uddin, managing director and chief currency strategist.
"The U.S dollar is our preferred currency for 2012. (But) in the near term, investors will get more optimistic about the euro zone," Mohi-uddin told Dow Jones Newswires by telephone Tuesday.
However, the euro zone will continue to adopt austerity steps and further interest rate cuts can't be ruled out, he said.
"At the same time, the U.S. economy is picking up (and) the Fed may not wait until 2014 and may start thinking about raising interest rates," he said.
However, the announcement of a Greek deal has clearly helped sentiment, he said.
"It takes away one of the risks that we have been worried about. But over the medium term, I'm worried that structural issues in the euro zone, and to some extent even in the U.S.... can easily come back," he said at an industry conference. "I wonder how much more we have to go before investors become cautious again."
He added that fiscal austerity measures being forced by Germany on other euro-zone nations can't be sustained because of the political conditions in the region and "eventually, something will give."
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