Morgan Stanley(US:MS) Di Yi Cai Jing·2026-01-22 10:38Core Viewpoint - The potential devaluation of the US dollar is seen as a "market stress scenario" that could lead to broader and more severe financial market turmoil, particularly affecting capital flows towards Asian markets [1][3]. Group 1: Causes of Dollar Devaluation - The chief economist of AMRO, He Dong, explains that during normalized periods, capital typically flows to Asia when the Federal Reserve eases monetary policy, while tightening usually results in capital outflows. However, the current situation requires a distinction between "normalized responses" and "market stress scenarios" [3]. - If the dollar's devaluation is perceived as a sign of diminished independence of the Federal Reserve, it may lead to unexpected market volatility, differing significantly from historical patterns of asset price movements [3][4]. - Morgan Stanley's report indicates that the transition towards a "multipolar world" is raising questions about the dollar's status, with US policies under President Trump being pivotal in determining the extent of the global shift away from the dollar [3][5]. Group 2: Political and Economic Factors - Concerns about the scale of US debt and its long-term repayment capacity are growing, compounded by Trump's use of tariffs as a political bargaining tool, which has strained NATO relations and increased policy uncertainty [4]. - The political pressure faced by the Federal Reserve Chairman and challenges to the independence of US institutions are casting a shadow over the dollar's future [4][5]. - The upcoming midterm elections in November 2026 and the nomination agenda for a new Federal Reserve Chairman are expected to heighten market concerns regarding the dollar [5]. Group 3: Financial Market Implications - He Dong emphasizes the importance of ensuring that financial institutions in the region have sufficient buffers to cope with potential market volatility, as the dollar is a crucial financing currency and Asian investors hold significant risk exposure to dollar assets [6]. - AMRO has placed "increased global financial market volatility" at the center of its risk assessment, indicating a medium level of potential impact and likelihood [6]. - The latest AMRO report highlights that global stock valuations remain high and credit spreads low, making the market particularly vulnerable to shifts in risk sentiment, with geopolitical tensions potentially leading to unexpected fluctuations in exchange rates and asset prices [7].