We don't recommend a specific terminal emulator as there are many different ones that have different features and different supported environments. What we can offer is the Product Availability Matrix which will give you a list of all compatible emulators and versions. I am attaching this pdf for you.
If you look at page 35, you will find a list of all of the supported terminal emulators and versions with UFT. You can then investigate each to see if it has the features you need for your testing requirements.