Morgan Stanley has downgraded its outlook for the US dollar citing declining Treasury yields after the US Federal Reserve signaled interest rate cuts in 2024.
The bank cut its outlook for the US currency to ‘Neutral’ from ‘Bullish’. However, it noted that seasonality and short positioning could potentially still drive further upside, Bloomberg News reported.
“Our conviction about dollar strength has waned meaningfully,” strategists including David Adams wrote in a note.
“US data deceleration has compressed growth differentials, US rates have fallen further compared with peers, and investors appear far from defensive based on equity returns,” said the note.