Morgan Stanley: we feel comfortable with long positions in dollars

Animal spirits are now often mentioned in press reports. The last time the US was experiencing animal spirits goes back to the 90s when James Rubin ran the US Treasury. Then it was the high tech boom driving many asset classes. The stock market started to correlate with retail sales as wealth effects kicked in.
We have not yet seen this effect in the US, but with the continued asset rally the likelihood of animal spirits taking over is not insignificant. Our ARIA US growth indicator has shown a solid 0.41% rise supported by the consumer,employment and housing. With improving company capex plans and inflation expectations, the Fed may end up finding fewer reasons to stay dovish. Last year, it was the shaky international background pushing the USD sharply lower as the Fed eased the markets' rate expectations via dovish talk.
Today even the global environment looks better with EMU economic and political divergence providing the exception.
We're comfortable with our USD long positioning against low yielding currencies EUR and JPY.

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