G10 currencies UBS View See table for current exchange rates and CIO forecasts Recommendations ¢ We believe the risks to the EURUSD currency pair are now more balanced, as tail risks on the European Tactical (6 months) . . e We continue to have a preference for the side have been considerably reduced. . ; . ; . . GBP and keep the short in the JPY. ¢ The GBP trended higher despite stimulus measures by the Bank of England. The main reason is the need for diversification out of the EUR and USD and decisive UK policy making. We maintain an overweight Strategic (1 to 2 years) after the strong rebound of economic data in 3Q 2012 which we expect to persist into 2013. ° We recommend that investors diversify ¢ The CAD remains supported by better growth dynamics. However in the short term, around the US from large USD and EUR exposures into elections and fiscal cliff debate, a setback cannot be ruled out. We also remain underweight in the AUD. minor currencies. Structural financing ¢ The SNB has shown that it can defend the CHF floor. With EUR tail risk reduced the CHF likely recovers issues weigh on all the major currencies. together with the EUR against most other currencies. Thus we close the CHF underweight. ° The best diversifiers based on long-term ¢ We expect stronger policy intervention in Japan to weaken the JPY over the coming months. macroeconomic fundamentals are the CAD and the SEK. The AUD, NOK and CHF A Positive scenario FX targets: EURUSD >1.35 / EURJPY 115 should only be added at better entry e The announcement of unlimited QE in the US, as well as a stronger-than-expected acceleration of global levels. The GBP also remains attractive. growth or further European integration would be EURUSD positive. EURUSD should trade above 1.35 in this case. Yen weakness should come as the Bank of Japan intervenes to weakens its currency. & Negative scenario FX targets: EURUSD <1.25 / EURJPY 90 ¢ The European growth outlook deteriorates further with continued recession in 2