The U.S. dollar is probably in a bear market, meaning emerging-market currencies are in for a good ride this year despite a weaker outlook for global growth, according to Morgan Stanley.
“We are bullish,” a team of analysts led by James Lord, the firm’s London-based head of fixed-income strategy, wrote in a note to clients on Tuesday. “Emerging-market currencies have lagged, but with a growing conviction that the dollar has turned, we think that catch-up is under way."
The call comes as an index of developing-market currencies flirts with the highest level since April, even as geopolitical tensions simmer in the build-up to this week’s G-20 meeting. The world’s biggest central banks are switching to a more accommodative stance, fueling demand for riskier assets.