Morgan Stanley forecasts that the U.S. dollar will decline by approximately 9% by the middle of next year, reaching levels last seen during the Covid-19 pandemic. The bank expects the U.S. Dollar Index (DXY) to fall to 91, with the current DXY near 2023 lows and already down 8.9% year-to-date. The Bloomberg Dollar Spot Index has dropped 0.5% in recent trading, and the dollar index is down 7.61%. Strategists led by Matthew Hornbach at Morgan Stanley attribute the expected decline to slowing U.S. economic growth and anticipated Federal Reserve interest rate cuts totaling 175 basis points. The bank projects the euro will rise to 1.25 from $1.1437, the British pound will strengthen to 1.45 from $1.35, and the Japanese yen will appreciate to 130 from 143. The Swiss franc is also expected to benefit from the dollar's weakness. Other major banks, including JPMorgan Chase and Goldman Sachs, also hold a bearish outlook on the dollar, citing President Donald Trump’s trade and tax policies, ongoing trade tensions, and growing U.S. fiscal deficits. Net short positions on the dollar are near three-year highs. Morgan Stanley further expects the 10-year U.S. Treasury yield to reach 4% by the end of this year, with a recent move up to 4.44%, followed by a larger decline next year as the Fed implements rate cuts.