Morgan Stanley Warns ‘Second Act’ of US Dollar Losses Incoming After the American Currency Suffers Worst First-Half Since 1973
Morgan Stanley warns that the US dollar's decline is not over, following its worst first half since 1973. The dollar index (DXY) is down nearly 11% in 2025, currently at 98.15. Analysts cite labor market weakness, tariff uncertainty, and potential changes in Fed leadership as factors contributing to the dollar's continued slide. Additionally, foreign holders of US assets are hedging against expected dollar depreciation, signaling concerns about the currency's future performance.
Banking giant Morgan Stanley says the US dollar’s decline is only enjoying an “intermission” before taking its next plunge.
In a new research note, Morgan Stanley highlights that the dollar finished the first half of 2025 with its biggest loss since 1973.
At time of writing, the dollar index (DXY), which pits the greenback against a basket of other major foreign currencies weighted by trade, is at 98.15, down almost 11% since the beginning of the year.
David Adams, head of G10 FX Strategy at Morgan Stanley, says a finale is yet to come for the dollar’s slide.
The dollar has printed a notable rally since July, but according to Morgan Stanley’s chief global FX strategist James Lord, a combination of recent labor market weakness, tariff uncertainty and the potential for Fed Chair Jerome Powell to be replaced earlier than expected, continues to push the dollar lower.
Says Lord,
And according to data compiled by the bank, foreign holders of US assets have begun placing hedges on their Treasury and equity exposures, indicating an expectation of dollar depreciation.
Says Adams,
