Money managers for Asia's wealthiest families say they will be looking elsewhere for returns after chasing the US dollar's gains in the past three years.
UBS Group AG, the world's largest private bank, is telling clients there is "little room for further dollar appreciation", said Mr James Purcell, cross-asset strategist at its wealth management business in Hong Kong.
Mr Stephen Diggle, who runs a family office in Singapore called Vulpes Investment Management, said the US rate increases are not enough "to chase a strong dollar".
Stamford Management, which oversees US$250 million (S$353 million) for Asia's rich, will review its outlook for greenback gains after expected advances in the first quarter, said Mr Jason Wang, its chief executive officer.
Strategists also predict the dollar's gains will slow in coming months, after the Federal Reserve committed to a gradual pace of tightening.
The currency will appreciate about 5 per cent to US$1.05 per euro by the third quarter of next year, according to a Bloomberg survey, after surging 10 per cent this year.
Its advance versus the Japanese currency will be limited to less than 4 per cent to 125 yen (S$1.46) after gains slowed to about 0.5 per cent this year, from more than 10 per cent in each of the previous three years.
"Our clients will likely see the increase in US interest rates as an opportunity to earn higher yields on their assets by shifting into dollars," said Mr Purcell. "We need to remind them that financial markets move on surprises, not absolutes."
The yen may be a better cross to express a strong dollar view than the euro, Mr Purcell said.
UBS expects the dollar to be little changed at US$1.08 per euro in six months, and to rise to 127 yen, he said.
The dollar's gains are already losing steam in parts of Asia, with the Indonesian rupiah rallying 7.3 per cent in the fourth quarter, the Malaysian ringgit 2.5 per cent and the Singapore dollar 0.9 per cent.
A gauge of the greenback is heading for a 1.1 per cent advance this quarter and an 8.5 per cent gain this year, after an 11 per cent surge last year.
Fed chair Janet Yellen signalled this month that the central bank is in no rush to raise rates again, following its first move in almost a decade.
Mr Russ Koesterich, chief investment strategist at BlackRock, the world's biggest asset manager, wrote in a commentary this month that long-term investors willing to withstand short-term volatility should consider Asian emerging stocks and bonds because prices are attractive.
Stamford Management expects the greenback to strengthen about 7 per cent next year to S$1.50 versus the Singapore dollar, a level not seen since April 2009, said Mr Wang.
The Singapore-based family office, which started switching its assets into the greenback from the local dollar more than two years ago, will review its position should the currency pair reach its target, he said.
"We could see an easy 5 to 10 per cent appreciation of the US dollar versus other risk or emerging market currencies," Mr Wang said.
"That, to me, is relatively easy money. Thereafter, we'll review it in late first quarter."
BLOOMBERG
