Morgan Stanley Sees $200 Billion Hedging Flows Propping Up Euro

The euro could climb to levels last seen five years ago as a drop in hedging costs would drive flows of more than $200 billion and prop up the currency, according to Morgan Stanley.

High US interest rates have long been a prohibitive factor for European investors looking to hedge their dollar exposure, since they effectively have to pay away that yield advantage when buying euros, and selling the greenback, forward.