Morgan Stanley expects dollar to fall 9% as US economic growth weakens

Morgan Stanley forecasts the dollar to fall by mid-2026 to the level last seen during the COVID-19 pandemic. The decline will be driven by the Federal Reserve’s rate cuts and slower US economic growth. The US dollar index will lose 9% and hit 91, the bank’s strategists say. 

This year, the greenback has already weakened due to trade turmoil. President Donald Trump’s tariffs are weighing down investor confidence in US assets, which has caused the dollar index to fall nearly 10% from its February high, Bloomberg reports. 

Morgan Stanley strategists note that the yen, euro, and Swiss franc will benefit most of all from greenback weakness. These currencies are considered to be the dollar’s competitors as safe havens.

The euro is projected to rise from 1.13 to around 1.25 against the dollar next year. The pound may strengthen from 1.35 to 1.45 driven by the UK’s low trade tension risks. At the same time, the yen is expected to grow to 130 against the US currency. 

Meanwhile, during early Asian trading on Monday, the greenback was lower against a range of currencies. According to Bloomberg, the dollar lost around 0.2%.