Warsh’s Fed Debut Is a Key Risk for FX, Morgan Stanley Says (1)

Federal Reserve Chairman Kevin Warsh’s first policy meeting this month could potentially jolt foreign-exchange markets and upend consensus carry trades, according to Morgan Stanley.

So far this year the dollar has been little changed even as oil prices surge and global bonds tumble in response to the conflict in the Middle East. Its stasis is curbing swings across major currencies and boosting the appeal of carry and relative-value trades.

That dynamic may all change when Warsh and his central bank colleagues gather in Washington, DC, a Morgan Stanley team of currency strategists led by David Adams said.

“The June ...