US dollar can weaken further - what must UAE, Middle East investors do?

Dubai: UAE and GCC investors will need to factor in a weak dollar – and which could drop further in the next 6-12 months – into their calculations. This is the case even with the US stock markets continuing to push higher as a new budget goes through the approval process.

The weakening dollar has been in the limelight again in recent days, with many UAE based expats finding the downside at the time of remittances.

Investors too need to account for the dollar losing more of its edge against other currencies, according to a new report by Standard Chartered. The dollar weakness has all to do with concerns over that economy’s growing budget deficit and the possibility of a return to higher inflation.

“We expect the US dollar to weaken and have accordingly upgraded Asia (ex-Japan) equities and Emerging Market (EM) local-currency bonds to overweight,” says the Standard Chartered report.

“Global equities also remain an ‘overweight’ position across portfolios, supported by healthy earnings, easing trade tensions, and controlled inflation (so far).”

According to the Standard Chartered report, "China’s outlook is stabilising on the back of targeted stimulus and improving retail activity. Growth in India and ASEAN is expected to remain well-supported."

Gold is the other obvious investment choice - and the asset has already seen 'strong central bank demand' and in its 'role as a diversifier when bonds offer less downside protection'.  

"Investors in the Middle East have an opportunity to reposition portfolios with greater international diversification," said Ayesha Abbas, Managing Director and Head of Affluent and Wealth Solutions, Europe, Middle East and Africa, and UAE at Standard Chartered.

"Asset classes such as Emerging Market bonds and equities across major regions (including non-US equities) are well-placed to help investors navigate volatility, capture income, and enhance portfolio resilience in today’s shifting landscape.”