1147 GMT - Morgan Stanley recommends selling the euro against the Australian dollar if foreign exchange volatility remains subdued, supporting demand for carry trades where investors borrow in low-yielding currencies to invest in higher-yielding currencies. Forward-implied Australian dollar yields are the highest within the G-10 and implied volatility--a measure of expected price swings in the options market--is very low, Morgan Stanley analysts say in a note. This should attract capital flows to Australia in relatively calm FX markets, they say. For the euro, markets could shift the implied European Central Bank policy path lower as rate-rise bets look overdone, they say. Morgan Stanley targets the euro falling to 1.53 Australian dollars with a stop loss of 1.69, compared to 1.6267 currently.