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Morgan Stanley Adjusts Currency Outlook, Remains Bearish on Yen
Morgan Stanley has shifted its outlook on the US dollar to a neutral stance with a bullish bias, indicating a strategy of buying on dips. This adjustment comes after the bank acknowledged that its previous forecast predicting a weaker dollar was incorrect. The change in perspective follows a weak US payrolls report that has dampened expectations for an interest rate hike by the Federal Reserve in October, which has contributed to a reduction in near-term support for the dollar rally.
The bank continues to maintain a bearish view on the Japanese yen, suggesting that carry trades will likely support the USD/JPY exchange rate. Morgan Stanley's strategists have recommended holding long dollar-yen positions, anticipating further gains against low-yielding currencies like the yen, euro, and Swiss franc due to the significant interest rate gap between the US and Japan.
In addition, Morgan Stanley favors the Norwegian krone over the euro and Swedish krona, linking this preference to Norway's status as a major energy exporter. The krone is expected to benefit from rising oil and gas prices, while the euro and Swedish krona face pressures from increasing energy import costs. The bank's analysis suggests that the krone could serve as a hedge against potential energy supply disruptions, particularly in light of ongoing geopolitical tensions in the Middle East.
Source: KLEA News