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Morgan Stanley Signals Expect USD Weakness At Month-End

FOREX
  • Morgan Stanley have noted that local equity markets strengthened across the board recently, which suggests that the USD should weaken against most currencies in the G10 in the final week of the month.
    • They indicate that they have published a foundation report to show that local equity returns in G10 are linked to appreciating local currencies versus USD in the last week of the month, possibly due to asset manager flows.
  • Their signal suggests that USD should weaken versus most currencies in the G10 except CHF this month-end. The SEK signal is also insignificant given the small equity market move (~0.0%). This is the second consecutive month that their model is predicting USD weakness at month-end.
  • MS cite their month-end strategy has more than made up for earlier underperformance in the past few months.
    • “Last month, the dollar weakened against most G10 currencies at month-end in line with the signals from our model. The strategy posted the biggest monthly gain since we started publishing our monthly updates (+0.8%).”
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