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(Bloomberg) -- Morgan Stanley sees an opportunity to snap up the dollar after the currency slid the most in 18 months against major peers following the Swiss National Bank’s surprise move to drop its cap on the franc versus the euro.
“This is very positive for the U.S. dollar in the long term,” Hans Redeker, the bank’s London-based head of global currency strategy, said in a telephone briefing. “What today’s Swiss franc move did provide us, we think, is an opportunity of very cheap U.S. dollars.”
The Bloomberg Dollar Spot Index fell as much as 1.4 percent, the most since July 2013, after Switzerland’s central bank abandoned the policy it adopted three years ago to keep the franc from gaining beyond 1.20 per euro. The decision, which sent shock waves through financial markets, came a week before the European Central Bank meets to discuss new monetary stimulus that may add pressure on the franc against the euro.
Bloomberg’s gauge, which tracks the U.S. currency against 10 major counterparts, slipped 0.2 percent to 1,137.85 at 2:26 p.m. in New York. The dollar fell 13 percent to 88.15 centimes, after touching 74.06, the weakest since August 2011. The euro tumbled 15 percent to 1.02343 francs and dropped 1.5 percent to $1.1609.
Morgan Stanley recommends buying dollar-franc on dips and selling the euro against the greenback.
“Get much more involved in short positions in euro- dollar,” Redeker said. “This move today must be seen in the context of a more aggressive European Central Bank. That obviously is going to put the euro under additional selling pressure, and that is going to broad-based.’
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