Connect with us

Hi, what are you looking for?

Investing

Dollar Battered, Bruised, but Set to Escape Bearish Clutches

Forex40 minutes ago (Jun 07, 2021 02:48PM ET)

(C) Reuters.

By Yasin Ebrahim

Investing.com – The dollar has been battered, bruised and given little chance of escaping the clutches of bearish bets, but Morgan Stanley (NYSE:MS) believes the greenback’s fortunes are about to change as real yields could be on the up and up.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.21% to 89.94.

“We’ve seen some modest USD weakness recently and now believe the time has come to start scaling into long USD positions,” Morgan Stanley said in a recent note.

The firm isn’t shy to admit that its somewhat controversial call on the dollar is not popular even among its own clients as “most investors remain bearish on the USD and are positioned accordingly.”

But real U.S. yields have remained shackled for far too long, and there isn’t much room left for further downside as the Federal Reserve is expected to taper bond purchases in early 2022 to curb inflation.

U.S. breakeven rates, market expectations for future inflation, point to inflation in the years ahead in the range of 2.4% to 2.6%. Investors will receive another update on inflation with consumer CPI slated for Thursday.

“It is difficult for real yields to head much lower, given where inflation breakevens are in the U.S. and the continued progress of the U.S. economy that we think will be keeping the Fed on track to taper asset purchases in early 2022,” Morgan Stanley added.

But others have suggested that even with raising rates, the greenback will struggle to advance as demand for the euro will continue to appreciate as the euro-area economy continues to recovery.

Yet, most of the upside in the euro from bets on a strong EU recovery appears to be priced into the single currency. The “euro failed to make any headway against the USD over the past two to three weeks despite the strong data and positive headlines from the region,” according to Morgan Stanley.

Dollar Battered, Bruised, but Set to Escape Bearish Clutches

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

World News

Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered...

World News

George Soros and Bill Gates are part of a consortium acquiring a British developer of rapid-testing technology, including for Covid-19 and tropical diseases,...

Tech

If you parked your car in one of the thousands of parking spots across Calgary, there’s a good chance you paid the Calgary Parking...

Investing

ForexMay 27, 2021 02:04AM ET (C) Reuters. By Peter Nurse Investing.com — The dollar edged higher in early European trade Thursday, finding support from...

Disclaimer: Yourmorningvoice.com it's managers and its employees (collectively "The Company") do not make any guarantee or warranty about what is advertised or above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. Copyright © 2021 Your Morning Voice. All Rights Reserved