US dollar to weaken in ‘coming weeks’ – Morgan Stanley

Analysts at Morgan Stanley offer their outlook on the G10 currencies, centered on the Euro, US dollar, Yen and Yuan, in its latest client note released on Friday.

Key Points (via Bloomberg):

Sees a weaker USD in "coming weeks", citing:

Economic data surprises in the US vs. G10

PBOC's policy stance

On the EUR,

Market too bearish on euro, overly concerned about European political risks & growth outlook.

Limited scope for the ECB to ease further given bond capacity constraints.

USD topping would herald the start of an EUR rally.

EUR/USD has absorbed bearish news without dropping under 1.1510, which is constructive.

On USD/JPY:

Looks for "one more leg higher" to 115.

Low Japanese real yields may keep USD/JPY supported "until risk assets turn, as we expect in coming weeks, and Japan's substantial exposure to U.S. risk assets renders it vulnerable to repatriation flows".

On Yuan:

USD rally could be blunted if there's a stabilization of Chinese equities that might be a sign the USD/CNH is peaking.