"Dollar hegemony seems to be over and it's time to head to short USD positions," Morgan Stanley said.
"We believe the dollar has reached its peak at current levels," says Hans Redeker, Global Head of FX Strategy.
"The dollar may weaken as credit spreads are rising, stock prices are falling, yields on government bonds are declining against disinflationary pressures and falling oil prices." - says Redeker.
Escalating tensions in trade, rising yields, and a steady US economy have led to investors' demand for the largest reserve currency in the world. The Bloomberg Index Dollar Spot has risen 8 percent since mid-April, enjoying a high cash flow inflow from hedge funds that recently raised their net long positions in currencies to the highest since January 2017.
Still, Morgan Stanley believes recent US asset inflows are short-lived and are prone to swift reversals.
Morgan Stanley joins the growing number of banks that believe the power of green money has fallen. The Goldman Sachs team said the USD is approaching the top, which has to ease currency pressure as a yuan. Credit Agricole also sees a weaker dollar after Democrats took control of the House of Representatives in the United States.
Source: Bloomberg Finance L.P.
Charts: Used with permission of Bloomberg Finance L.P.
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