Morgan Stanley shifts its threat outlook on the USD to impartial and recommends going lengthy on JPY in opposition to the USD and different risk-sensitive currencies amid heightened issues of a tough touchdown.
Key Factors:
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Danger Skew Adjustment:
- Morgan Stanley adjusts its threat skew on the USD to impartial in mild of ongoing market turbulence and hard-landing fears.
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Market Situations:
- The present FX market is characterised by a “protection” regime, which can persist and doubtlessly result in a future USD bear market.
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Lengthy JPY Technique:
- Historic tendencies point out that the best trades throughout protection regimes contain being lengthy on JPY, each in opposition to the USD and particularly in opposition to risk-sensitive currencies.
Conclusion:
Morgan Stanley’s evaluation suggests a cautious method in direction of the USD whereas favoring JPY as a extra sturdy place within the present financial local weather.
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