Morgan Stanley says investor sentiment toward the U.S. dollar has flipped positive for the first time since early 2025, reflecting growing confidence in the U.S. economic outlook.
In a note to clients, the bank’s strategists said the shift coincides with mounting uncertainty abroad — particularly political developments in Japan and France — that have eroded the relative appeal of non-dollar assets.
The strategists added that demand for downside protection against a weaker greenback is fading, suggesting investors see limited near-term risk of a dollar correction.
However, Morgan Stanley cautioned that the dollar’s strength may not last indefinitely. The currency could face renewed pressure if upcoming U.S. data fail to show a convincing rebound, especially in employment.
- Rest-of-the-world pessimism might now be fully priced, if not overpriced
- further foreign-exchange hedging remains plausible as markets begin to reassess relative growth and policy trajectories
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Morgan Stanley’s shift toward a more positive dollar stance suggests further near-term upside for USD crosses, particularly against the yen and euro. However, traders may temper bullish positions if U.S. employment or inflation data rekindle rate-cut expectations. Data is sparse from the US though with the government shut down.
