Morgan Stanley, one of the few remaining dollar bulls, lowered its outlook for the dollar, citing a decline in Treasury yields. Following the accommodative stance of the Federal Reserve.
The bank sharply changed its outlook for the dollar to neutral from bullish, but said seasonality and shorting could still push gains further. The bank had been betting on a stronger dollar since at least mid-November Earlier it was estimated that the dollar spot index would be stronger by about 8 percent From the current level in the second quarter.
Hedge funds and banks including Goldman Sachs Group turned bearish on the dollar in December following signals from Federal Reserve Chairman Jerome Powell. A change in stance towards cutting interest rates this year. The dollar index later fell to a five-month low before rising in the first four days of January.
“Our confidence in the dollar’s strength has diminished significantly,” strategists including David Adams wrote in a note published Jan. 4. “Slowdown in US data shows growth gap has narrowed, Interest rates have declined further compared to peers And investors don’t appear to be defensive based on stock returns.”
Fidelity International, JPMorgan Chase & Co. and HSBC Holdings Plc were among a minority of money managers who went against the consensus in December and warned that the dollar would surprise by strengthening in 2024 as the U.S. economy delivers better results. Most of the analysts surveyed bloomberg Dollar is expected to weaken,
Morgan Stanley also closed its short euro-yen trading recommendation, suggesting investors Instead take a short position between the euro and the yen, The bank estimates that the yen will strengthen due to falling US rates and the euro will decline as the eurozone economy continues to weaken.
“Disappointing outlook for the dollar does not change fundamentals Other G3 currencies″Adams maintained.
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