MORGAN STANLEY: The Fed's 'new dovish approach' could hurt this currency

Janet Yellen adopted a decidedly dovish tone on Tuesday during her speech at the Economic Club of New York.

After the speech, the US dollar fell and the market pushed expectations for the next rate hike from the Fed even further into the future. According to Bloomberg, the next fully-price rate hike is now January 2017.

In light of that, a Morgan Stanley team led by Hans W. Redeker included a small blurb in a note to clients about how some major currencies could fare in this environment:

"Risky assets should remain supported by this new dovish approach as it suggests for each unit of GDP more monetary accommodation than previously thought. Given the JPY's inverse relationship to risk we continue trading USDJPY from the long side although other JPY crosses such as ZARJPY, AUDJPY, or NZDJPY should perform even better. The high-beta MXN is also likely to gain support in the current environment."

The Japanese yen is little changed versus the dollar on Wednesday morning ET. Since the beginning of February, the yen has appreciated by 6.9% against the dollar. So, Morgan Stanley believes the recent yen strength won't continue as risk assets are supported.