Morgan Stanley Sees Euro Hitting 5-Year Highs on $200 Billion Hedging Flows

3 articles · Updated · Bloomberg · May 15

$200 billion in potential hedging flows could lift the euro to levels last seen five years ago, Morgan Stanley said.
Lower hedging costs are the key driver: European investors have long been discouraged from covering dollar exposure because high US rates force them to give up the greenback's yield advantage in forward markets.
If that cost burden eases, investors buying euros and selling dollars forward would create sustained support for the single currency.
The call points to rate differentials and currency-hedging economics—not just spot-market sentiment—as a major force behind the euro's next leg higher.

As hedging costs fall, is a $200 billion currency shift about to create the strongest euro in five years?

Could renewed global trade tensions actually strengthen the dollar, defying Wall Street’s forecast for a surging euro?

After last year's dollar shock, are equity funds now the wild card that will determine the euro's ultimate fate?