Investing.com – Some of the US dollar’s post-election moves have already partially reversed and UBS expects consolidation at these levels rather than an even higher dollar in the near future.

At 06:15 ET (11:15 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.4% higher at 106.612, rebounding after falling to a one-week low earlier in the session.

Last week, the index reached its highest level in a year after Donald Trump won the presidential election.

Many market participants believe that Trump 2.0 is not only a repeat of the US dollar-supporting policy of 2018-2019, but also a much broader paradigm shift, said analysts at the Swiss bank in a November 20 note.

In particular, the view that import tariffs can play a more significant role in trade and fiscal policy should be consistent with the appreciation of the dollar by limiting imports and also provide an incentive for U.S. trading partners to weaken their currencies.

“We have no strong reason to oppose these views and, in fact, we have argued that the central message of the second Trump administration is a higher dollar value in 2025 and 2026,” UBS said.

The bank’s objections are more tactical in nature.

First, a sustained range break requires a steady stream of dollar-positive headlines, and there may be less supply of them at least before Trump’s inauguration, as recent disputes over the Treasury Secretary nomination have highlighted.

Second, because breakevens have played an significant role in pushing up nominal yields in the U.S., real rate differentials are less favorable to the dollar than nominal differentials.

Third, the market appears to have reached its pricing limit for Fed cuts over the next 12-15 months and may move in the opposite direction on any signs of weakness in US data.

“For these reasons, we continue to see consolidation rather than an even higher U.S. dollar in the near future, which we believe will end the year at 1.07,” UBS added.