Morgan Stanley Downgrades U.S. Dollar: Impact on BRICS and Crypto

• Morgan Stanley Shifts Stance on U.S. Dollar
• Implications of the Downgrade amidst Global Economic Changes
• The BRICS Agenda and its Impact on the Dollar
• The BRICS Success and the U.S. Dollar

Morgan Stanley Shifts Stance on U.S. Dollar

Global financial services giant, Morgan Stanley, has modified its outlook for the U.S. dollar from ‘Bullish' to ‘Neutral'. This announcement came on Friday, with the bank attributing this shift to the Federal Reserve's recent initiation of interest rate cuts that have resulted in the decline of U.S. Treasury yields. Consequentially, Morgan Stanley's prior ‘Bullish' stance on the U.S. dollar has now been officially downgraded to 'Neutral'.

Implications of the Downgrade amidst Global Economic Changes

The change in stance happens at a crucial time when the BRICS alliance (Brazil, Russia, India, China, and South Africa) is making substantial efforts to challenge the global dominance of the U.S. dollar. Interestingly, Morgan Stanley stood out as the sole bank that favoured the U.S. dollar, classifying it as ‘Bullish' in the previous year, and it has now pivoted, terming its outlook as ‘Neutral' in global markets.

The U.S. dollar index has experienced a consistent decline over the past three months, currently standing at 102 points. It's important to note that Goldman Sachs had already classified the U.S. dollar as ‘Bearish' in December of the previous year. Should the U.S. dollar index fall to $100 and potentially dip into double digits, local currencies might start to flourish.

The BRICS Agenda and its Impact on the Dollar

This situation aligns with the de-dollarization plan of the BRICS alliance, where they intend to exclude the U.S. dollar from trade. This ambitious project could have widespread consequences on various sectors in the U.S. if BRICS decided to completely abandon the U.S. dollar.

There are emerging discussions within the BRICS alliance about the introduction of a ‘joint currency' to directly contend with the U.S. dollar. Iran, a new addition to the BRICS member countries, is advocating for the establishment of this joint currency amongst the 10-member nations, to diminish the role of the U.S. dollar. The alliance is at the forefront of the de-dollarization initiative, aspiring to make this notion a global phenomenon.

The BRICS Success and the U.S. Dollar

The BRICS coalition has already made significant strides in achieving its objectives, with numerous developing nations now opting for local currencies over the U.S. dollar in cross-border transactions. Although these transactions are currently small-scale, they could potentially accumulate over time to eliminate dependence on the U.S. dollar entirely.

Edited by Jonathan Stoker