U.S. Dollar Set to Decline 10%, Says Morgan Stanley Strategist
Morgan Stanley is sounding the alarm over the U.S. dollar’s long-term trajectory, projecting another 10% drop over the next year despite its modest rebound in July.
The investment bank’s outlook points to persistent pressures from President Trump’s tariff policies, which are expected to slow economic growth and raise unemployment in the months ahead.
The warning follows a historic slump earlier this year, with the dollar losing 11% of its value against major currencies in just six months — the steepest first-half decline in more than 50 years. This sharp move brought an end to a 15-year bull run in the U.S. currency. Although July’s 3.2% gain offered temporary relief, strategists at Morgan Stanley argue that the structural forces driving weakness remain in place.
David Adams, head of G10 FX strategy at the bank, described the current phase as “an intermission rather than the finale,” predicting the next leg of the downturn will likely emerge within the next 12 months. The shift, he says, will become more evident as U.S. interest rates and economic growth align more closely with those of other major economies, removing a key pillar of dollar support.
One potential counterweight to this bearish scenario lies in the behavior of foreign investors, who collectively hold more than $30 trillion in U.S. assets. A significant portion of these holdings — particularly the $8 trillion owned by European investors in American bonds and stocks — remains unhedged against currency swings. This lack of protection signals that many still anticipate the dollar will hold its ground or strengthen.
However, that confidence could change quickly. If foreign institutions begin to hedge their positions en masse, it would effectively mean selling dollars on the market, accelerating the decline. Morgan Stanley warns that such a shift in sentiment could push the currency toward fresh multi-decade lows.
For global markets, a prolonged dollar downturn could have sweeping consequences, potentially boosting commodities like oil and gold while also drawing more investor attention toward alternative assets such as Bitcoin. The bank’s forecast underscores a broader trend: in a world of shifting trade policies and geopolitical tensions, the dollar’s dominance can no longer be taken for granted.
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Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 10,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
