"In this context USD now looks less vulnerable than it did before the data. This should limit how high even risky currencies like AUD and NZD can rally. We doubt that they can recover their highs seen in 2011", said the analyst.

Meanwhile the other contenders for the role of funding currency (EUR, CHF, and JPY) should lose out relative to USD, in UBS's view. "This feeds into a theme we have discussed at length which is that the correlation of EUR with risk-on can continue to break down going forward".

Fri, Feb 03 2012, 20:16 GMT | FXstreet.com