By Lester Pimentel
Aug. 29 (Bloomberg) -- Morgan Stanley boosted its forecast for the dollar as investors pare foreign-asset holdings amid deepening economic slowdowns in Europe and Asia.
The greenback will end the year at $1.40 per euro, from an earlier forecast of $1.53 per euro, Morgan Stanley currency strategists Stephen Jen and Spyros Andreopoulos wrote in a report today. The dollar will strengthen to $1.32 per euro by year-end 2009. The New York-based firm also said the U.S. currency will end 2008 at 107 yen, a change from its previous forecast of 97 yen.
``Bad news all over the world should be U.S. dollar- supportive, mainly because the current distribution of global assets is U.S. dollar-negative, and an unwind of these cross- border positions will be positive for the U.S. dollar,'' Jen and Andreopoulos said in the report.
Foreign-asset holdings jumped to $17.6 trillion in 2007 from $6.7 trillion in 2002, according to the report. The dollar will gain as those ``cross-border investments are unwound,'' Morgan Stanley said.
Europeans' confidence fell more than forecast this month as the economy teetered on the brink of recession. An index of executive and consumer economic outlook sentiment dropped to 88.8 from 89.5 in July, the European Commission in Brussels said today.
The dollar was little changed at $1.4705 per euro at 10:15 a.m. in New York, from $1.4706 yesterday. The U.S. currency decreased 0.6 percent to 108.85 yen, from 109.5.
To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net
Last Updated: August 29, 2008 10:17 EDT
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