Markets may be betting on the greenback to scale new heights, but chances are now is the time to go short, Adrian Zuercher, head of asset allocation for Asia at UBS, said on Thursday.
The dollar has surged in the wake of Donald Trump's surprise election win in the U.S. and as the U.S. Federal Reserve surprised markets at its meeting last week by indicating it would likely hike rates three times next year, a faster rate of tightening than the widely expected two times.
On Wednesday, the U.S. dollar index, which measures the greenback against a basket of currencies, extended recent gains, touching 103.65, according to Reuters data, its highest since December 2002. The dollar index retreated to 102.97 at 10:43 a.m. HK/SIN on Thursday. But Zuercher said the gains may sputter soon.
"We actually think the U.S. dollar is highly overvalued at this stage and particularly over the past couple of weeks," Zuercher told CNBC's "Squawk Box" on Thursday. "The rally is unjustified."
Zuercher said that after a four-year-long rally in the greenback, it's become overvalued against the G10 currencies, potentially by as much as 15-20 percent against the euro and 30 percent against the yen.
To be sure, Zuercher acknowledged that Trump's policies, if enacted, will likely spur higher inflation, pushing up U.S. interest rates and supporting the greenback.
But he added there was a flip side to that.