**Morgan Stanley Predicts US Dollar Depreciation in 2025 Amid Fed Rate Cuts**
Morgan Stanley strategists forecast a depreciation of the US dollar in 2025, driven primarily by anticipated Federal Reserve interest rate cuts that are expected to outpace those of the European Central Bank. This expected dollar weakness is influenced by slowing US economic growth, uncertain trade policies, and reduced fiscal support, with significant implications for global currency markets and crypto asset valuations.
### Fed Actions Point to a 10% US Dollar Decline
According to Morgan Stanley strategists, including David Adams and James Lord, the Federal Reserve’s forthcoming interest rate cuts will likely weaken the US dollar. They point to several contributing factors such as slowing growth in the US economy and ongoing policy uncertainty. James Lord highlighted that “policy uncertainty, such as tariff negotiations,” continues to exert downward pressure on the dollar.
The decline of the US dollar extends beyond traditional currency markets. Morgan Stanley notes that the euro has recently gained 11.5% against the dollar. The expected depreciation could influence capital flows, potentially benefiting cryptocurrencies and other risk assets. Mike Wilson commented that the dollar might see a 10% drop this year, which could provide a boost to alternative asset markets.
### Diverse Market Perspectives on Dollar Trends
Market experts have varied opinions on the dollar’s trajectory. Andrew Sheets emphasized that the dollar’s 15-year bull cycle has ended, signaling a period of prolonged weakness ahead. Similarly, analysts from J.P. Morgan anticipate continued USD weakness throughout the year, driven by both structural and cyclical factors.
David Adams, Head of G10 FX Strategy at Morgan Stanley, summarized the outlook:
*“We’re likely at the intermission rather than the finale. The second act for the dollar’s weakening should come over the next 12 months, as US interest rates and growth converge with those of the rest of the world.”*
### Crypto Markets Eye Increased Risk Asset Flows
The projected decline of the US dollar to an index level of 91.00 by mid-2026 recalls its significant 11% depreciation in 2025, marking the worst yearly performance since 1973. This environment may encourage investors to shift capital toward cryptocurrencies and other risk assets.
Ethereum (ETH), a leading crypto asset, is currently trading at $4,211.64 with a market capitalization of approximately $508.34 billion and a market dominance of 13.01%, according to CoinMarketCap. Over the past 90 days, Ethereum has experienced an 11.68% price increase. Its 24-hour trading volume stands at $40.18 billion, reflecting a notable 64.82% change.
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As market dynamics evolve, investors and analysts alike will be closely watching the US dollar and related asset classes for shifts that could shape the global financial landscape in the year ahead.
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