The euro is overvalued despite the European Central Bank's rate hike, and the yen is rich as well, this strategist says.
The market is pricing in too many interest rate hikes for the euro, according to Mansoor Mohi-Uddin, chief currency strategist at UBS.
Speaking just hours before the European Central Bank raised interest rates 25 basis points, as expected, Mohi-Uddin said the market "is pricing in too many rate hikes," which is keeping the euro high. But he anticipates more caution from Trichet, "and then we'll probably get a market reaction the other way." Mohi-Uddin puts fair value for the euro at 1.20.
He is equally bearish on the yen, predicting that the natural disasters there will force the Bank of Japan to hold off on raising rates while most of the rest of the world tightens.
As a result, he expects dollar-yen to rise to 90 by the end of this year - and 100, yes, 100, by the end of 2012.
You can watch the conversation right here.
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