Morgan Stanley adjusts its outlook on the dollar recovery in 2024

Morgan Stanley, previously supporting a dollar uptrend, revises its stance on the currency. The bank shifts its bullish perspective to neutral, noting that seasonality and short-term positioning could still drive gains. Since mid-November, the bank had bet on the dollar’s strength, predicting an 8% strengthening of the Dollar Spot index in the second quarter.

This contrasts with the bearish projections of hedge funds and banks, including Goldman Sachs Group, in December, after Federal Reserve Chairman Jerome Powell signaled a shift towards interest rate cuts this year. Subsequently, the dollar index dropped to a five-month low before recovering in the first four days of January. “Our conviction in the strength of the dollar has significantly diminished,” stated strategists, including David Adams.

The slowdown in U.S. data has impacted growth differentials, and U.S. interest rates have fallen further compared to their counterparts. Fidelity International, JPMorgan Chase & Co., and HSBC Holdings Plc were among the few who challenged the consensus in December, warning that the dollar would surprise by strengthening in 2024 as the U.S. economy improves.

Despite the majority of surveyed analysts anticipating dollar weakness, Morgan Stanley closes its short-term trading recommendation between the euro and the yen, suggesting investors take a short position between the euro and the yen. The bank predicts that the yen will strengthen with the decline in U.S. rates, while the euro will fall due to the ongoing weakness in the eurozone economy. “The gloomier outlook for the dollar does not alter the fundamentals of the other G3 currencies,” Adams asserted.

Published by Iraic.Info, a news and information agency.