[Global Network Finance Comprehensive Report] Morgan Stanley released a report on May 31, pointing out that due to factors such as interest rate cuts and economic growth slowdown, a commonly used dollar measurement index is expected to fall by about 9% compared to current levels during the same period next year, with ongoing trade turmoil continuing to apply pressure, the recent downturn of the dollar may worsen.
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The bank's strategists Matthew Hornbach and others indicated in the report that interest rates and the currency market have initiated a major trend of significant depreciation of the dollar and a notable steepening of the yield curve, after the dollar had been in a broad trading range for the past two years.
Currently, traders and analysts are weighing Trump's disruptive trade policies, with Morgan Stanley also joining the ranks questioning the outlook for the dollar. Previously, JPMorgan strategist Meera Chandhan had already advised investors to bet against the dollar, instead betting on the yen, euro, and Australian dollar.
Data shows that Trump's trade policies have weakened market confidence in U.S. assets, triggering a reflection on the global over-reliance on the dollar. The dollar index has fallen nearly 10% since its peak in February. However, data from the U.S. Commodity Futures Trading Commission indicates that current bearish sentiment on the dollar has not yet reached historical extremes, meaning the dollar may further weaken in the future.
Morgan Stanley strategists believe that the biggest beneficiaries of a weaker dollar will be the euro, yen, and Swiss franc. The bank expects the euro to rise against the dollar from the current level of about 1.13 to around 1.25 next year; the pound against the dollar may rise from 1.35 to 1.45; and the yen against the dollar may rise from about 143 to 130.
In addition, Morgan Stanley also expects that the yield on 10-year U.S. Treasury bonds will reach 4% by the end of this year and will drop significantly after the Federal Reserve cuts interest rates by 175 basis points next year. (Chen Shiyi)
