Dollar Trapped in Negative Feedback Loop as Foreigners May Flee
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The dollar has peaked and its weakness may become a negative spiral as foreign investors exit due to the poor currency-hedged returns of U.S. assets, according to Morgan Stanley.
Markets are underestimating the potential for the dollar to fall based on shifts in U.S. growth and the Federal Reserve policy narrative, the bank said. It forecasts the yen climbing to 102 per dollar and the euro to $1.31 by the end of the year, while Nomura International Plc expects foreign selling to weigh against the greenback.