Will the dollar strengthen from Trump...Wall Street forecasts weak dollar next year

Although the U.S. dollar has been strong since Trump's victory in the presidential election, major Wall Street financial companies have forecast that the dollar could weaken next year, Bloomberg reported.

Morgan Stanley predicted in a recent report that improved investor sentiment will lead to higher investment demand for non-dollar assets, pushing the dollar's value below current levels at the end of next year.

The dollar has recently strengthened against major currencies as tariff and tax cut policies from the second Trump administration fuel inflation and complicate the U.S. Federal Reserve's decision to cut interest rates.

But with real interest rates falling, minus inflation, the effects of improving risk-preferred sentiment are combining to create a pessimistic scenario for the dollar, Morgan Stanley explained.

Citigroup expects decisions that could lead to a potential trade war under Trump's second-term administration to disappoint speculators who have been betting on a stronger dollar.

Point72 Asset Management said optimism about the dollar has already been heavily reflected in prices, adding that a recovery in growth in Europe and elsewhere would put bearish pressure on the dollar.

JPMorgan also warned that "if the Fed cuts interest rates to supply liquidity to the market, and the dollar loses its relative interest rate and growth advantage, the dollar could weaken very much."