Morgan Stanley Anticipates 9% Drop in U.S. Dollar Amid Sluggish Economic Growth

Experts at Morgan Stanley forecast that the U.S. dollar could decline to levels last seen during the Covid-19 pandemic by mid-2026, impacted by interest rate cuts and slowing economic growth, according to the bank’s latest outlook.

Matthew Hornbach, a strategist at Morgan Stanley, predicts that the U.S. Dollar Index could fall by around 9%, reaching 91 by this time in 2026. He added that this would worsen the recent decline in the dollar, as trade disruptions continue to weigh on the currency. Hornbach believes that interest rates and currency markets have embarked on significant trends that are likely to persist, leading to a weaker dollar and steeper yield curves after two years of volatile trading within broad ranges.

According to a recent report from the bank, there is skepticism surrounding the dollar’s outlook, as traders and analysts weigh the potentially disruptive trade approach of former President Donald Trump.

Strategists at JPMorgan Chase & Co. also maintain a bearish view on the U.S. dollar. Instead, they recommend betting on the yen, euro, and Australian dollar.

The U.S. Dollar Index has already declined by roughly 10% since its February peak, as Trump’s trade policies have dampened sentiment toward U.S. assets and triggered a reassessment of the global reliance on the dollar.