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Morgan Stanley Warns Dollar Rally Won’t Last Long Amid Iran War

Anya Andrianova
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Morgan Stanley predicts the U.S. dollar’s recent rally will fade as interest-rate gaps between the U.S. and Europe narrow, undermining its safe-haven appeal. The dollar surged after U.S.-Israel strikes on Iran in late February, bolstered by its status as the global energy trade currency amid geopolitical turmoil. Analysts warn escalating Iran conflict will stifle global growth, reducing demand for the greenback despite its initial haven-driven gains. Missile strikes on Tel Aviv (March 24) intensified market volatility, but Morgan Stanley argues the dollar’s strength is temporary without sustained rate support. The firm expects Europe’s potential rate cuts to outpace the U.S., further eroding the dollar’s yield advantage and accelerating its decline.
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Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the worldAmericas+1 212 318 2000EMEA+44 20 7330 7500Asia Pacific+65 6212 1000Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the worldAmericas+1 212 318 2000EMEA+44 20 7330 7500Asia Pacific+65 6212 1000US Dollar:Blast damage to an apartment block following an overnight missile attack by Iran in Tel Aviv, on March 24.The dollar will weaken as interest-rate differentials between the US and Europe shrink and the war in Iran curbs economic growth, according to Morgan Stanley. The greenback, which has strengthened since the US and Israel attacked Israel on Feb. 28, is benefiting from being a safe haven and the currency of the world’s top energy producer.

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