Morgan Stanley predicts dollar peak and emerging markets growth by next year

According to the Morgan Stanley forecast, the dollar reaching its peak will lead to a decline in the currency in 2023, along with Treasury yields on expectations of slowing inflation. This scenario must support assets of emerging markets.

Morgan Stanley analysts led by Andrew Sheets have indicated that the dollar index will fall to 104 by the end of next year, while the euro's fortunes will become higher than the U.S. currency as investment inflows into Europe resume.

The dollar is expected to peak as uncertainty over Fed rate tightening diminishes. A final rate hike in January 2023 is projected, and interest rate cuts will follow in the fourth quarter. However, at the same time, the European Central Bank will increase the rate until March of that year, according to the U.S. bank.