Morgan Stanley Sounds Alarm: Dollar Could Tumble 10% by 2026
The leading global financial service firm, Morgan Stanley, has once again issued a stark warning against the US dollar. With Trump’s multiple tariff policies circulating, the dollar shows a weakening stance ahead, with Morgan Stanley predicting a 10% drop in its value in the near future. Moreover, the firm also cites “the delayed impact of tariffs on jobs and unemployment,” which are likely to keep pressuring the dollar in the long run.
Also Read: Oil and Nuclear Deals Now Set in Yuan, Not Dollars
Morgan Stanley’s Ominous Dollar Prediction
Morgan Stanley, in its recent press note, outlined new elements hounding the US dollar. The entry was quick to emphasize how the value of the US dollar has dropped 11% against major currencies, dubbing it as one of its biggest value declines to date.
“The value of the US dollar against other currencies dropped about 11% in the first half of this year, the biggest decline in more than 50 years, ending a 15-year bull cycle.”
The firm later explained that despite a 3.2% recovery in USD value this month, the American currency continues to battle pressure, rising due to Trump’s tariffs and their impact on jobs and unemployment.
“Despite a recovery of 3.2% in July, the delayed impact of tariffs on growth and unemployment—besides policy uncertainties—is likely to keep negative pressure on the dollar.”
The entity now predicts the dollar’s ominous fall, adding how the currency may end up declining 10% by 2026.
“We’re likely at the intermission rather than the finale,” says David Adams, head of G10 FX Strategy at Morgan Stanley. “The second act for the dollar’s weakening should come over the next 12 months, as US interest rates and growth converge with those of the rest of the world.”
The Currency Could Still Rise: Here’s How
Amid such stark earnings, Morgan Stanley was also quick to explain a rising phenomenon. The firm shares how foreign investors holding $30 trillion worth of US assets have not yet hedged their exposure. This development underlines how the dollar can still appreciate if the market forces continue to support the currency holistically.
“Foreign investors’ behavior around their dollar holdings offers an important window as to how the dollar’s value might change in the coming months. Currently, foreigners own more than $30 trillion in US assets, with European investors alone holding $8 trillion of US bonds and stocks. According to Morgan Stanley Research’s estimates, just over half of the European holdings aren’t hedged, or protected against a decline by using instruments like forwards and options. The fact that most foreign investors have chosen not to hedge their exposure, particularly on the equity side, reflects a view that the dollar will appreciate.”
However, the firm also shared how selling is still an option, which could jeopardize the dollar hitting all-time new lows.
“However, many foreign investors are starting to rethink this view and are adding FX hedges, which really means dollar selling, potentially decreasing its value further.’
Also Read: Will China’s Stablecoin Further Push For De-Dollarization?
Read More
Morgan Stanley Sounds Alarm: Dollar Could Tumble 10% by 2026
The leading global financial service firm, Morgan Stanley, has once again issued a stark warning against the US dollar. With Trump’s multiple tariff policies circulating, the dollar shows a weakening stance ahead, with Morgan Stanley predicting a 10% drop in its value in the near future. Moreover, the firm also cites “the delayed impact of tariffs on jobs and unemployment,” which are likely to keep pressuring the dollar in the long run.
Also Read: Oil and Nuclear Deals Now Set in Yuan, Not Dollars
Morgan Stanley’s Ominous Dollar Prediction
Morgan Stanley, in its recent press note, outlined new elements hounding the US dollar. The entry was quick to emphasize how the value of the US dollar has dropped 11% against major currencies, dubbing it as one of its biggest value declines to date.
“The value of the US dollar against other currencies dropped about 11% in the first half of this year, the biggest decline in more than 50 years, ending a 15-year bull cycle.”
The firm later explained that despite a 3.2% recovery in USD value this month, the American currency continues to battle pressure, rising due to Trump’s tariffs and their impact on jobs and unemployment.
“Despite a recovery of 3.2% in July, the delayed impact of tariffs on growth and unemployment—besides policy uncertainties—is likely to keep negative pressure on the dollar.”
The entity now predicts the dollar’s ominous fall, adding how the currency may end up declining 10% by 2026.
“We’re likely at the intermission rather than the finale,” says David Adams, head of G10 FX Strategy at Morgan Stanley. “The second act for the dollar’s weakening should come over the next 12 months, as US interest rates and growth converge with those of the rest of the world.”
The Currency Could Still Rise: Here’s How
Amid such stark earnings, Morgan Stanley was also quick to explain a rising phenomenon. The firm shares how foreign investors holding $30 trillion worth of US assets have not yet hedged their exposure. This development underlines how the dollar can still appreciate if the market forces continue to support the currency holistically.
“Foreign investors’ behavior around their dollar holdings offers an important window as to how the dollar’s value might change in the coming months. Currently, foreigners own more than $30 trillion in US assets, with European investors alone holding $8 trillion of US bonds and stocks. According to Morgan Stanley Research’s estimates, just over half of the European holdings aren’t hedged, or protected against a decline by using instruments like forwards and options. The fact that most foreign investors have chosen not to hedge their exposure, particularly on the equity side, reflects a view that the dollar will appreciate.”
However, the firm also shared how selling is still an option, which could jeopardize the dollar hitting all-time new lows.
“However, many foreign investors are starting to rethink this view and are adding FX hedges, which really means dollar selling, potentially decreasing its value further.’
Also Read: Will China’s Stablecoin Further Push For De-Dollarization?
Read More