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Morgan Stanley: USD remains relatively resilient - eFXnews

FXStreet (Łódź) - The eFXnews team remark that Morgan Stanley sees the USD as very resilient in the light of the recent sharp drop in US yields.

Key quotes

"'Indeed, USD’s correction has been moderate, given the extent and pace of gains seen recently, and underlines the strength of the bullish trend, in our view. We would also suggest that this robust performance is a function of USD establishing itself as an asset currency, MS argues."

"'As a result, we expect USD behavior to change, and this is likely to be most emphasized in its relationship with yields. Lower yields would not necessarily be seen as a USD negative in this scenario, as was the case with EUR in the past two years through to this May. Relative asset valuations are once again the driver of this change, favoring USD and attracting inflows,' MS clarifies."

"'The post-FOMC reaction aside, the recent decline in US yields is likely a reflection of inflows and consistent with a higher USD. The fact that these flows are the result of relative fundamentals and not a geopolitical shock – portfolio allocation to the US rather than a safe-haven flow – also implies that these trends are likely to be sustainable, in our view,' MS adds."

"'Hence, we think the medium-to-longer-term structural USD bullish trend is set to stay in place despite recent US yield developments,' MS adds."

"In line with this view, MS maintains a short EUR/USD in its strategic portfolio from 1.2920 with a revised profit-stop at 1.2840 and a target at 1.20."

'This content has been provided under specific arrangement with eFXnews.'

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