Morgan Stanley Questions Dollar Index Falling Below 100

According to Odaily, Morgan Stanley has expressed skepticism about the U.S. Dollar Index dropping below the critical level of 100. Despite Federal Reserve Chairman Jerome Powell's indication at the Jackson Hole meeting that future policy may be relaxed, the risk remains tilted towards further weakening of the dollar. David Adams, the bank's G-10 Forex Strategy Chief, stated in a report released on Tuesday that the 100 level is significant both psychologically and technically. He noted that without a shift in global dynamics, breaking this threshold would be challenging. Adams highlighted that ongoing weak economic data from Europe reduces the appeal of selling the dollar. He also mentioned that political risks in Europe might still be underestimated, while the upcoming 2024 U.S. presidential election is a clear risk event that could benefit the dollar. Adams recommended shorting the dollar against the yen in preparation for a decline in U.S. interest rates, while going long on the British pound and Australian dollar, and shorting the euro and Canadian dollar.