Investing.com – The dollar rallied on the return of the ‘Trump trade’ as Republican presidential nominee Donald Trump’s chances of returning to the White House appear to be increasing, but UBS believes stronger gains should be traded as Trump is not clear positive for the dollar.

“We still expect the dollar to rebound if Trump wins. However, over the medium term, we do not view Trump as clearly positive on the USD and therefore recommend selling stronger dollar gains,” UBS said in a note on Friday.

The call came as the U.S. election, with just over two weeks left, is too close to call, although Trump has gained ground in recent weeks and currently has a slight lead over Vice President Kamala Harris in some polls.

The recent rise in the dollar has been attributed in part to market valuations that enhance the likelihood of a Trump victory, with the dollar seen as one of the so-called Trump’s deal that has gained traction.

The dollar’s recovery from Trump’s deals may prove short-lived, says UBS, forecasting the eurodollar to rise towards 1.16 in 2025, suggesting narrow growth in the dollar’s value in the longer term.

Meanwhile, in the broader currency market, some emerging market currencies that have struggled against the dollar in recent weeks are likely to remain in favor.

“We believe the South African rand, supported by a more reform-minded government, and the Mexican peso, which is already trading at a significant risk premium in the event of political turmoil, are good options for raising carryover funds in the medium term,” UBS said.