Morgan Stanley shakes the markets. Indeed, the investment bank provides for a 9 % drop in the US dollar in a year, which brings the currency back to its lowest levels from the pandemic. A shock projection, published on May 31, which calls into question the dominant status of the greenback in the global monetary order and feeds the fears of a lasting change in international financial balances.
In short
- The Morgan Stanley bank plans to fall 9 % from the US dollar within a year, returning to its lowest levels from the Pandemic of COVID-19.
- This forecast is based on a slowdown in the American economy and an anticipation of high reductions in the federal reserve.
- Morgan Stanley observes a notable increase in competing currencies such as Euro, Sterling, Yen or Yuan.
- This dynamic could weaken the world domination of the dollar and pave the way for a global monetary rebalancing.
Pressure dollar: economic slowdown and anticipation of rate drops
While a bill threatens the dollar and could trigger a systemic economic crisis, the strategists of the Morgan Stanley bank in a note addressed to investors on May 31 announce An important forecast:
We believe that the rate and currency markets have started sustainable trends, which will push the dollar much lower and will accentuate the yield curve.
According to the investment bank, the dollar index (DXY) could dive at 91 points in the next twelve months, a fall of 9 %, which would bring back the American currency to its lowest levels observed during the pandemic.
This decline would be added to an already well -started drop: the dollar has lost almost 10 % since its February 2025 summit, which has widened concerns about its short and medium -term resilience.
This early depreciation of the greenback is based on several converging macroeconomic factors, now clearly identified by analysts:
- A slowdown in American growth, which weakens global demand for the dollar;
- A monetary policy expected as much more flexible: Morgan Stanley provides -175 points of basis for the drop in Fed guiding rates by 2026;
- A sustainable tension on the bond markets, with yields at 10 years projected at 4 % by the end of 2025, before a more marked decline;
- The deleterious effects of trade tensions revived by the Trump administration, which weigh on the confidence of foreign investors;
- A general movement for repositioning capital, while the dollar appears less and less attractive in the exchange markets.
At this stage, Morgan Stanley no longer speaks of a simple lower cycle, but a change in monetary paradigm, marked by deep structural trends, likely to last far beyond the twelve months mentioned in the projection.
A structural decline of the dollar: the role of competing BRICS and currencies
Beyond the macroeconomic fundamentals, the expected fall of the dollar is integrated into a global geopolitical dynamic, carried by the rise of the BRICS and the acceleration of dedollarization.
The Morgan Stanley bank thus underlines a change in the preferences of global investors: “The currency traders are starting to consider local currencies for the first time, while the dollar stagnates in the graphics».
This CAP change is unwinding in particular by a 19 % drop in foreign purchases of US treasury bills, for the benefit of assets denominated in Yuan, Ruelle or Euro.
In such an environment, several rival currencies record notable gains against the dollar. Morgan Stanley plans that the euro could reach 1.25 against 1.13 currently. The Japanese yen would appreciate 130 against 143, and the pound sterling would climb to 1.45 against 1.35.
These projections reflect a progressive shift in the center of global monetary gravity. The BRICS, which aim to offer an alternative to the dollar for international exchanges, benefit from this strategic dollar withdrawal.
Erosion of confidence in the American currency could ultimately redefine the capital flows and call into question the domination of the dollar as a world reserve currency.
While the White House tries to minimize the scope of this dynamic, some analysts believe that the current evolution marks the start of a systemic realignment, in which the United States could gradually lose its global monetary lever because of the transition to many local currencies. If Morgan Stanley's forecast is materialized, it could serve as a catalyst for a broader transformation, where cryptos, emerging currencies and regional currencies would compete for a new reference role in international markets.
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