Remarks from MS on the euro, US dollar, yen and yuan

The bank look for a weaker USD in "coming weeks". Factors to watch:

  • economic data surprises in the US vs. G10
  • PBOC's policy stance

On 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 a EUR rally
  • EUR/USD has absorbed bearish news without dropping under 1.1510, which is constructive

on USD/JPY:

  • MS look 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

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MS comments via Bloomberg