Morgan Stanley Evaluation on Dollar and Global Currencies

In a report published on global foreign exchange markets, Morgan Stanley stated that the strong outlook for the dollar is maintained in the medium term and noted that short-term pullbacks could be evaluated.

Dollar and Fed Expectations

Weak US employment data announced at the end of September limited the rise of the dollar by reducing expectations that the US Federal Reserve will undertake a new interest rate hike.

Despite this limited movement, the bank resolutely continues to maintain its strong outlook for the dollar in the medium term.

Short-Term Pullbacks

While maintaining its neutral-positive view on the dollar, Morgan Stanley noted that short-term pullbacks could be evaluated as buying opportunities.

Potential new surges in energy prices and risk-off tendencies rank among the key factors that could cut short the dollar's weakening process.

Japanese Yen and Carry Trade

Forecasting a weak outlook for the Japanese yen, the bank stated that carry trade transactions will continue to support the dollar-yen parity.

The parity hovering near upper limits and the depreciation of the yen keep the possibility of the Japanese administration intervening in the foreign exchange market on the agenda.

Advantages of the Norwegian Krone

For investors seeking protection against increases in energy prices, the Norwegian krone became the prominent currency highlighted in the report.

Supply concerns originating from West Asia and potential increases in oil prices position the Norwegian krone advantageously compared to the euro and the Swedish krone.

Eurozone and Energy Costs

The euro continues to remain under serious pressure due to the sensitivity the European economy shows toward high energy costs.

The widening yield spread between French bonds and benchmark bonds is also among the elements creating additional pressure on the euro.