Time to Sell the US Dollar, Morgan Stanley Says

According to Morgan Stanley’s analysts, investors are overly confident about the US dollar, which means that it’s probably time to sell.

A team of analysts at the bank, led by Morgan Stanley’s senior analyst David Adams, has explained that investors are expecting to see a stark rise in the value of the US dollar in the near future, with the currency expected to rise over the euro, Australian dollar, and British pound.

Morgan Stanley analysts have said the consensus has shifted towards a higher dollar. Additionally, they claim this increased optimism has been fueled by positive data readings coming out of the US economy and the tariffs expected to be introduced by President Trump.

Morgan Stanley analysts claim US outperformance narrative is increasing dollar’s value

A common trend in the analysis of economics around the world has been the power of so-called “narratives,” which is the belief that words—and media reports specifically—can have serious effects on the value of goods regardless of whether the information reported is accurate or not.

According to analysts at Morgan Stanley, the good news regarding the value of the US dollar has to do with investors “internalizing the narrative of the US outperformance.” They argue that this is one of the main factors behind its increase in value.

Another key takeaway from the analysis published by Morgan Stanley is that investors may well be overestimating the speed and true magnitude of the changes President Trump will impose in US trade policy in his second term.

Morgan Stanley analysts expect Trump’s policies implementation to take a while

The analysts at Morgan Stanley who have evaluated and indeed encouraged people to sell the US dollar given its current value have also said Trump’s policies may well take a while to implement, and their scope might be narrower than anticipated.

Investors at Morgan Stanley have also said investors can now bet against the US dollar and can do so by buying foreign currencies, such as the British pound and Australian dollar.

This is because such currencies are less exposed to trade tensions relative to the US dollar. Hence, their value is expected to be less volatile. Both the British pound and Australian dollar are also currently trading at an almost historically low price.

Morgan Stanley analysts have said investors could likely bet on increases in the values of the pound and Australian dollar, with the currencies target being $1.32 per £1 and AU$ 0.675 per $1.