Good news for ‘supervets’? Morgan Stanley denies dollar will recover in 2024 – El Financiero

Morgan Stanley, one of the remaining dollar bulls, cut its outlook for the dollar, citing falling Treasury yields. After the Federal Reserve’s favorable turn.

The bank changed its outlook for the dollar from bullish to neutral, but said seasonality and shorting could still drive gains. The bank had been betting on a strong dollar since at least mid-November and Earlier, the dollar spot index was forecast to strengthen by around 8 percent from current levels in the second quarter.

Hedge funds and banks, including Goldman Sachs Group, turned bearish on the dollar in December following Federal Reserve Chairman Jerome Powell’s signal. A change in the downward trend in interest rates this year. The dollar index then hit a five-month low before rising in the first four days of January.

“Our confidence in dollar strength has weakened significantly,” strategists including David Adams wrote in a note published on Jan. 4. “Slowdown in US data narrows growth gap, Interest rates have fallen more than peers And investors look far from defensive based on stock returns.”

Fidelity International, JPMorgan Chase & Co and HSBC Holdings Plc were among the minority money managers who went against the consensus in December by warning that the dollar would be surprised to strengthen in 2024 as the US economy performed better. Most analysts surveyed by Bloomberg Expect the dollar to weaken.

Morgan Stanley also cut its short euro-yen trading recommendation, suggesting investors Instead take a short position between the Euro and the Yen. The bank predicts that falling US rates will strengthen the yen and weaken the euro as the eurozone economy continues to weaken.

“A dovish outlook for the dollar does not alter fundamentals Other G3 currencies” Adams maintained.