Multinational investment bank Morgan Stanley downgrades outlook for the U.S. dollar

Multinational investment bank Morgan Stanley downgraded the outlook for the U.S. dollar from ‘Bullish’ to ‘Neutral’ on Friday. The global bank cited that the Federal Reserve’s decision to lower interest rates led to a decline in U.S. Treasury yields.

Morgan Stanley’s outlook for the U.S. dollar is now officially ‘Neutral’ and downgraded from its previous stance of ‘Bullish’. The downgrade comes at a time when the BRICS alliance is working to undermine the U.S. dollar’s global dominance.

Surprisingly, Morgan Stanley was the only bank that supported the U.S. dollar last year, calling the currency ‘Bullish’. However, the bank has now reversed course and is calling the U.S. dollar’s prospects ‘Neutral’ in the global markets.

The U.S. dollar index has been declining steadily for the past three months and is currently at 102 points. Goldman Sachs downgraded the U.S. dollar to ‘Bearish’ in December of last year.

The U.S. dollar index could fall to $100, and if it dips into double digits, local currencies could begin to strengthen. This development coincides with the BRICS agenda of de-dollarization, which aims to eliminate the U.S. dollar from global trade.

“Our conviction about dollar strength has waned meaningfully,” the Morgan Stanley report said. “US data deceleration has compressed growth differentials. U.S. rates have fallen further compared with peers, and investors appear far from defensive based on equity returns.”

BRICS is now planning to create a ‘joint currency’ to challenge the U.S. dollar. New BRICS member Iran has called for the creation of a joint currency within the 10-member nations and the elimination of the U.S. dollar. The alliance is spearheading the de-dollarization initiative and working to make it a global phenomenon.

The BRICS bloc has already been successful in its efforts, as a handful of developing countries have begun using local currencies for cross-border transactions instead of the U.S. dollar. While these transactions are currently on a small scale, they could eventually eliminate reliance on the U.S. dollar over time.