Morgan Stanley turns bullish on the US dollar: abandons weak outlook, expects Dollar Index to rise to 104 by mid-2027

(1) Morgan Stanley has abandoned its prediction of a weaker US dollar. In a report to clients, the bank stated: "We previously expected the downward trend of the US dollar to continue until the second half of 2026. We were wrong." (2) Morgan Stanley now expects the dollar to strengthen by the end of the year and this trend to continue into 2027, as interest rates rise. (3) The bank predicts that the US Dollar Index will rise from the current 101.2 to 104.00 by mid-2027. (4) The bank added that the Federal Reserve's hawkish stance, relatively stronger US interest rates, and rising negative political risks in Europe mean a more optimistic outlook for the US dollar, rather than continued weakness.