Morgan Stanley Cuts Dollar Targets as Fed Set to Ease

The dollar may drop to the weakest since December 2009 versus the euro as the Federal Reserve buys more assets in so-called quantitative easing to stimulate growth, Morgan Stanley said.

The U.S. currency is likely to reach $1.46 per euro by year-end and trade little changed at 81 yen, Morgan Stanley said in a note to clients, adjusting previous estimates that the greenback would be at $1.36 against the euro and 93 yen. The dollar will rally in 2011, reaching $1.32 per euro and 93 yen by year-end, the bank predicted.

“The market has become very sensitive about talk of further QE, and the ‘punish the printer’ theme has started to be a major theme in the foreign exchange market,” Stephen Hull, head of global currency strategy in London at Morgan Stanley, wrote in a note dated yesterday. “We have revised our currency forecasts with a weaker profile for the U.S. dollar over the forecast horizon.”

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- Posted: 2010-10-28 23:44:56

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