U.S. Dollar Suffering Historic Losses Continue: Morgan Stanley Predicts Further Decline in Second Half of the Year
Morgan Stanley Predicts Further Decline for the US Dollar
In a surprising turn of events, Morgan Stanley, a leading global financial services firm, has predicted a further decline for the US dollar over the next 12 months. The bank's head of G10 FX Strategy, David Adams, believes the dollar's slide is not yet finished, with a potential drop of about 10% by the end of 2026.
According to Adams, the dollar's sharp fall in the first half of 2025—the worst since 1973—is just an "intermission," with further depreciation ahead. This forecast is based on the convergence of US growth rates and interest rates with those of other major economies, which is expected to reduce the dollar’s relative attractiveness.
Foreign exchange hedging of US assets by foreign investors adds a further negative risk premium on the dollar. The bank's economists expect a challenging environment for the Federal Reserve, with tariffs pushing inflation higher initially but also harming US economic growth and employment with a lag. This situation complicates Fed policy and contributes to Morgan Stanley’s economists being out of consensus by forecasting no rate cuts in 2025 but a faster and deeper pace of rate cuts in 2026.
The projected moderation in US interest rates relative to other countries is a key factor behind the dollar's expected decline. However, tariffs increasing inflation could provide some support for the dollar. Yet, labor market weakness and policy uncertainty in the US remain a source of downward pressure on the dollar.
As of now, the dollar index (DXY) is at 98.15, down almost 11% since the beginning of the year. This outlook reflects Morgan Stanley’s differentiated and somewhat bearish stance in the current market consensus.
Meanwhile, in the world of cryptocurrency and technology, several significant developments have taken place. For instance, the BYDFi Card has officially launched, aiming to seamlessly bridge Web 3.0 assets and real-world spending. Solid launches on Fuse Network offer decentralized banking for 'normies', while Dreamcash begins the rollout of its trading platform with Hyperliquid integration via waitlist access.
In other news, Plume and Mercado Bitcoin aim to tokenize $500 million real-world assets, driving RWA adoption across Latin America. Caldera announces a partnership with EigenCloud to integrate EigenDA Version Two.
These developments, while exciting, are dwarfed by the potential implications of Morgan Stanley's prediction for the US dollar. As investors and businesses navigate this changing landscape, it's crucial to stay informed and adapt strategies accordingly.
- In light of Morgan Stanley's prediction, investors might consider diversifying their portfolio by investing in altcoins as a potential hedge against the further decline of the US dollar.
- As the US dollar continues to depreciate, businesses might reevaluate their financial strategies, possibly exploring the use of cryptocurrencies for international transactions to bolster their profit margins.
- The predicted decline in the US dollar could lead to increased interest in business models centered around cryptocurrency and blockchain, as these technologies may offer more stability in a volatile global finance scene.
