MORGAN STANLEY SPECTRUM CURRENCY LP - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2004 or

[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to__________________

Commission File Number 0-31563

MORGAN STANLEY SPECTRUM CURRENCY L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-4084211
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Demeter Management Corporation
825 Third Avenue, 9th Floor
New York, NY 10022
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 310-6444

(Former name, former address, and former fiscal year, if changed
since last report)

Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No___________

Indicate by check-mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

MORGAN STANLEY SPECTRUM CURRENCY L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2004

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MORGAN STANLEY SPECTRUM CURRENCY L.P.
STATEMENTS OF FINANCIAL CONDITION

MORGAN STANLEY SPECTRUM CURRENCY L.P.
STATEMENTS OF OPERATIONS
(Unaudited)

MORGAN STANLEY SPECTRUM CURRENCY L.P.
STATEMENTS OF OPERATIONS
(Unaudited)

MORGAN STANLEY SPECTRUM CURRENCY L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 2004 and 2003
(Unaudited)

MORGAN STANLEY SPECTRUM CURRENCY L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)

MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Morgan Stanley Spectrum Currency L.P. (the "Partnership").
The financial statements and condensed notes herein should be
read in conjunction with the Partnership's December 31, 2003
Annual Report on Form 10-K.

1. Organization
Morgan Stanley Spectrum Currency L.P. is a Delaware limited
partnership organized to engage primarily in the speculative
trading of futures contracts, options on futures contracts, and
forward contracts in global currency markets. The Partnership is
one of the Morgan Stanley Spectrum series of funds, comprised of
the Partnership, Morgan Stanley Spectrum Global Balanced L.P.,
Morgan Stanley Spectrum Select L.P., Morgan Stanley Spectrum
Strategic L.P., and Morgan Stanley Spectrum Technical L.P.

The Partnership's general partner is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker is
Morgan Stanley DW Inc. ("Morgan Stanley DW"). The clearing
commodity broker is Morgan Stanley & Co. Incorporated ("MS &
MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Co."). Demeter, Morgan Stanley DW and MS & Co. are wholly-owned
subsidiaries of Morgan Stanley. The trading advisors to the
Partnership are John W. Henry & Company, Inc. and Sunrise Capital
Partners, LLC (individually, a "Trading Advisor", or
collectively, the "Trading Advisors").

2. Related Party Transactions
The Partnership's cash is on deposit with Morgan Stanley DW and
MS & Co. in futures, forwards, and options trading accounts to
meet margin requirements as needed. Morgan Stanley DW pays
interest on these funds based on a prevailing rate on U.S.
Treasury bills. The Partnership pays brokerage fees to Morgan
Stanley DW.

3. Financial Instruments
The Partnership trades futures contracts, options on futures
contracts, and forward contracts in global currency markets.
Futures and forwards represent contracts for delayed delivery of
an instrument at a specified date and price. Risk arises from
changes in the value of these contracts and the potential
inability of counterparties to perform under the terms of the
contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest
rate volatility.
MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The market value of contracts is based on closing prices quoted
by the exchange, bank or clearing firm through which the
contracts are traded.

The Partnership's contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 defines a derivative
as a financial instrument or other contract that has all three of
the following characteristics:

1) One or more underlying notional amounts or payment
provisions;
2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3) Terms require or permit net settlement.

Generally, derivatives include futures, forward, swaps or options
contracts, and other financial instruments with similar
characteristics such as caps, floors and collars.

MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The net unrealized gains (losses) on open contracts, reported as a
component of "Equity in futures interests trading accounts" on the
statements of financial condition, and their longest contract
maturities were as follows:

Net Unrealized Gains (Losses)
on Open Contracts Longest Maturities

Exchange- Off-Exchange- Exchange- Off-Exchange-
Date Traded Traded Total Traded Traded
$ $ $

Jun. 30, 2004 - (2,490,181) (2,490,181) - Sep. 2004
Dec. 31, 2003 - 4,878,640 4,878,640 - Mar. 2004

The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.

The Partnership also has credit risk because Morgan Stanley DW
and MS & Co. act as the futures commission merchants or the
counterparties, with respect to most of the Partnership's assets.
Exchange-traded futures, forward, and futures-styled options
contracts are marked to market on a daily basis, with variations
in value settled on a daily basis. Morgan Stanley DW and MS &
Co., each as a futures commission merchant for the Partnership's
exchange-traded futures, forward, and futures-styled options
contracts, are

MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

required, pursuant to regulations of the Commodity Futures
Trading Commission ("CFTC"), to segregate from their own assets,
and for the sole benefit of their commodity customers, all funds
held by them with respect to exchange-traded futures, forward,
and futures-styled options contracts, including an amount equal
to the net unrealized gains (losses) on all open futures,
forward, and futures-styled options contracts. With respect to
the Partnership's off-exchange-traded forward currency contracts,
there are no daily exchange-required settlements of variations in
value nor is there any requirement that an amount equal to the
net unrealized gains (losses) on open forward contracts be
segregated, however, MS & Co. and Morgan Stanley DW will make
daily settlements of losses as needed. With respect to those
off-exchange-traded forward currency contracts, the Partnership
is at risk to the ability of MS & Co., the sole counterparty on
all such contracts, to perform. The Partnership has a netting
agreement with MS & Co. This agreement, which seeks to reduce
both the Partnership's and MS & Co.'s exposure on off-exchange-
traded forward currency contracts, should materially decrease the
Partnership's credit risk in the event of MS & Co.'s bankruptcy
or insolvency.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Liquidity. The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker, and MS & Co. as clearing broker
in separate futures, forwards, and options trading accounts
established for each Trading Advisor, which assets are used as
margin to engage in trading and may be used as margin solely for
the Partnership's trading. The assets are held in either non-
interest bearing bank accounts or in securities and instruments
permitted by the CFTC for investment of customer segregated or
secured funds. Since the Partnership's sole purpose is to trade
in futures, forwards, and options, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.

The Partnership's investment in futures, forwards, and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be taken
nor liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the daily
limit for several consecutive days with little or no trading.
These market conditions could prevent the Partnership from
promptly liquidating its futures or options contracts and result
in restrictions on redemptions.

There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions. For the periods covered
by this report, illiquidity has not materially affected the
Partnership's assets.

There are no known material trends, demands, commitments, events
or uncertainties at the present time that will result in, or that
are reasonably likely to result in, the Partnership's liquidity
increasing or decreasing in any material way.

Capital Resources. The Partnership does not have, nor expect to
have, any capital assets. Redemptions, exchanges and sales of
additional units of limited partnership interest ("Unit(s)") in
the future will affect the amount of funds available for
investment in futures, forwards, and options in subsequent
periods. It is not possible to estimate the amount, and
therefore the impact, of future redemptions of Units.

There are no known material trends, favorable or unfavorable,
that would affect, nor any expected material changes to, the
Partnership's capital resource arrangements at the present time.

Off-Balance Sheet Arrangements and Contractual Obligations. The
Partnership does not have any off-balance sheet arrangements, nor
does it have contractual obligations or commercial commitments to
make future payments that would affect its liquidity or capital
resources.

Results of Operations
General. The Partnership's results depend on the Trading
Advisors and the ability of each Trading Advisor's trading
programs to take advantage of price movements in the futures,
forwards, and options markets. The following presents a summary
of the Partnership's operations for the three and six month
periods ended June 30, 2004 and 2003 and a general discussion of
its trading activities during each period. It is important to
note, however, that the Trading Advisors trade in various markets
at different times and that prior activity in a particular market
does not mean that such market will be actively traded by the
Trading Advisors or will be profitable in the future.
Consequently, the results of operations of the Partnership are
difficult to discuss other than in the context of the
Trading Advisors' trading activities on behalf of the Partnership
during the period in question. Past performance is no guarantee of
future results.

The Partnership's results of operations set forth in the
financial statements on pages 2 through 11 of this report were
prepared in accordance with accounting principles generally
accepted in the United States of America, which require the use
of certain accounting policies that affect the amounts reported
in these financial statements, including the following: The
contracts the Partnership trades are accounted for on a trade-
date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded on the Statements
of Operations as "Net change in unrealized trading profit/loss"
for open (unrealized) contracts, and recorded as "Realized
trading profit/loss" when open positions are closed out, and the
sum of these amounts constitutes the Partnership's trading
results. The market value of a futures contract is the settlement
price on the exchange on which that futures contract is traded on
a particular day. The value of foreign currency forward
contracts is based on the spot rate as of the close of business,
New York City time, on a given day. Interest income revenue, as
well as management fees, incentive fees and brokerage fees
expenses of the Partnership are recorded on an accrual basis.

Demeter believes that, based on the nature of the
operations of the Partnership, no assumptions relating to the
application of critical accounting policies other than those
presently used could reasonably affect reported amounts.

For the Quarter and Six Months Ended June 30, 2004
The Partnership recorded losses net of interest income totaling
$19,529,341 and expenses totaling $3,601,575, resulting in a net
loss of $23,130,916 for the quarter ended June 30, 2004. The
Partnership's net asset value per Unit decreased from $14.41 at
March 31, 2004 to $12.93 at June 30, 2004.

The most significant trading losses of approximately 3.9% and
0.9%, respectively, resulted from positions in the Japanese yen
and Singapore dollar versus the U.S. dollar. Long positions in
both Asian currencies versus the U.S. dollar generated losses
during April as the dollar surged following the release of
stronger-than-expected U.S. jobs data. The yen also weakened due
to Japanese government currency market intervention. Newly
established short Asian currency positions incurred losses during
May as the dollar's value declined in response to fears of
potential terrorist attacks, expanding energy prices, and the
release of weaker-than-expected economic data. During June,
short Asian currency positions experienced losses due to the
yen's rise prompted by better-than-anticipated improvements in
the Japanese economy. The yen continued its rise later in the
month in response to speculation that the Bank of Japan
would move to raise interest rates amid further confirmation that
Japan's economic recovery was on track. Long positions in the
South African rand versus the U.S. dollar contributed losses of
approximately 1.7% as the dollar reversed higher in response to
rising U.S. interest rates and an improving U.S. economy.
Additional Partnership losses of approximately 1.4% and 1.3%,
respectively, stemmed from long positions in the British pound
during April and long positions in the Norwegian krone during
June, both versus the U.S. dollar, as the dollar benefited from
expectations for rising U.S. interest rates and the perception
that the U.S. economy was experiencing a sustainable recovery.
A portion of the Partnership's overall losses was offset by gains
of approximately 0.4% achieved from short positions in the
Australian dollar versus the U.S. dollar as the Australian
currency declined after statistics revealed that Australian
economic growth slowed to its lowest point in more than a year.
Further pressure stemmed from market speculation for a narrowing
of interest rate differentials between Australia and the U.S., as
well as lower gold prices during the first half of June.
Additional gains of approximately 0.3% were established from long
positions in the Swiss franc versus the U.S. dollar as the
dollar's value declined in May in response to surging energy
prices and weaker-than-expected U.S. economic data. Smaller
gains of approximately 0.2% were recorded from short positions in
the euro versus the U.S. dollar during April as the dollar's
value benefited from Alan Greenspan's comments concerning
U.S. inflation, stronger U.S. economic activity and the potential
for higher U.S. interest rates.

The Partnership recorded losses net of interest income totaling
$33,153,352 and expenses totaling $7,131,137, resulting in a net
loss of $40,284,489 for the six months ended June 30, 2004. The
Partnership's net asset value per Unit decreased from $15.66 at
December 31, 2003 to $12.93 at June 30, 2004.

The most significant trading losses of approximately 5.9% and
1.8%, respectively, were recorded from positions in the Japanese
yen and Singapore dollar versus the U.S. dollar. Short Asian
currency positions against the U.S. dollar during March recorded
losses as the yen reversed higher due to speculation that the
Bank of Japan was relaxing its efforts to weaken the yen. After
reversing to long positions in the Asian currencies versus the
U.S. dollar during April, the U.S. dollar surged upwards
following the release of stronger-than-expected U.S. jobs data,
thereby, causing losses. The yen also came under pressure
following efforts by the Japanese government to weaken the yen by
intervening in the currency markets. Short Asian currency
positions incurred losses again during May as the dollar's value
declined in response to fears of potential terrorist attacks,
expanding energy prices, and the release of weaker-than-expected
economic data. During June, short Asian currency positions
experienced losses due to the yen's rise prompted by
better-than-anticipated improvements in Japanese economic data.
The yen continued its rise later in the month in response to
speculation that the Bank of Japan would move to raise interest
rates amid further confirmation that Japan's economic recovery
was on track. Additional Partnership losses of approximately 4.3%
stemmed from long positions in the South African rand versus the
U.S. dollar during January and February amid expectations for a
decline in gold prices due to an anticipated improvement in the
global macro-economic environment during 2004. During April,
long South African rand positions versus the U.S. dollar
experienced losses as the dollar's value moved higher. During
May, short South African rand positions incurred losses as the
commodity-linked currency reversed higher in response to rising
gold prices. Losses of approximately 2.3% occurred from long
positions in the Norwegian krone versus the U.S. dollar during
January and June amid a strengthening of the U.S. dollar caused
by a perceived shift in U.S. Federal Reserve interest rate
policy. Losses in the peso were spurred by encouraging signs of
a recovery in the Mexican economy. Finally, smaller losses of
approximately 1.4% were experienced from short positions in the
Mexican peso versus the U.S. dollar. A portion of the
Partnership's overall losses during the first half of the year
was offset by gains of approximately 0.7% from short positions in
the Swiss franc versus the U.S. dollar during January as the
dollar's value moved higher amid the prospects for future
increases in U.S. interest rates. Additional gains of
approximately 0.6% were provided from long positions in the
British pound versus the U.S. dollar during January and February
as the dollar sold off versus the pound due to interest rate
differentials between the U.S. and the U.K., while the pound's
value increased amid an increase in U.K. interest rates.

For the Quarter and Six Months Ended June 30, 2003
The Partnership recorded revenues including interest income
totaling $6,641,296 and expenses totaling $3,372,435, resulting
in net income of $3,268,861 for the quarter ended June 30, 2003.
The Partnership's net asset value per Unit increased from $14.48
at March 31, 2003 to $14.93 at June 30, 2003.

The most significant trading gains of approximately 7.0% were
recorded from long positions in the euro versus the U.S. dollar
during May as the value of the euro strengthened to an all-time
high amid uncertainty regarding the Bush Administration's economic
policy, renewed fears of potential terrorist attacks against
American interests, and investors' preference for non-U.S. dollar
denominated assets. Additional gains of approximately 5.2%
resulted from long positions in the Australian dollar versus the
U.S. dollar during April, May, and June as the Australian dollar's
value strengthened in response to continued weakness in the U.S.
dollar and higher interest rates relative to those in the U.S.,
Europe, and Asia. A portion of the Partnership's gains for the
quarter was offset by losses of approximately 3.4% recorded
from short positions in the British pound versus the U.S. dollar
during April, as the pound strengthened early in the month amid
expectations that the Bank of England would likely leave interest
rates unchanged, and during May, due to the release of lower-than-
expected unemployment data from Great Britain. Long positions in
the British pound versus the U.S. dollar during June resulted in
further losses as the value of the pound reversed lower following
comments from the British Finance Minister concerning the U.K.'s
prospects for entry into the European Monetary Union. Additional
losses of approximately 1.6% and 1.0% resulted from positions in
the Japanese yen and Singapore dollar, respectively, versus the
U.S. dollar during May as the value of these currencies
strengthened and then reversed lower amid speculation that the
Bank of Japan favored a weaker yen to spur economic activity.
Smaller losses of approximately 0.8% stemmed from long positions
in the South African rand versus the U.S. dollar as the value of
the rand reversed lower during May amid growing speculation of an
interest rate cut by the Reserve Bank of South Africa.

The Partnership recorded revenues including interest income
totaling $12,963,261 and expenses totaling $6,033,998, resulting
in net income of $6,929,263 for the six months ended June 30,
2003. The Partnership's net asset value per Unit increased from
$13.93 at December 31, 2002 to $14.93 at June 30, 2003.

The most significant trading gains of approximately 12.6%
were recorded from long positions in the euro versus the U.S.
dollar as the value of the euro strengthened to an all-time high
during May amid uncertainty regarding the Bush Administration's
economic policy, renewed fears of potential terrorist attacks
against American interests, and investor preference for non-U.S.
dollar denominated assets. During January and April, gains were
also experienced from long positions in the euro versus the U.S.
dollar as the U.S. dollar's value weakened amid renewed fears of
a military conflict with Iraq, increased tensions with North
Korea, and weak U.S. economic data. Additional gains of
approximately 7.3% resulted from long positions in the Australian
dollar versus the U.S. dollar as the Australian currency
strengthened in response to continued weakness in the U.S.
dollar, higher interest rates relative to those in the U.S.,
Europe and Asia, and higher gold prices earlier in the year.
Smaller gains were provided from long positions in the New
Zealand dollar versus the U.S. dollar as the New Zealand dollar's
value increased on the heels of higher gold prices and strength
in the Australian dollar. A portion of the Partnership's gains
for the first half of the year was offset by losses of
approximately 3.8% and 2.4% from positions in the Japanese yen
and Singapore dollar, respectively, versus the U.S. dollar as the
value of these currencies moved without consistent direction
versus the U.S. dollar. Losses of approximately 3.7% resulted
during April and May from short positions in the British pound
versus the U.S. dollar as the value of the pound
strengthened early in the month amid expectations that the Bank
of England would likely leave interest rates unchanged and the
release of lower-than-expected unemployment data from Great
Britain. During June, losses stemmed from long positions in the
British pound versus the U.S. dollar as it's value increased
early in the month, amid expectations that the Bank of England
would likely leave interest rates unchanged, and then reversed
lower, after the British Finance Minister released positive
comments regarding the U.K.'s entry prospects into the European
Monetary Union.
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards, and options. The
market-sensitive instruments held by the Partnership are acquired
for speculative trading purposes only and, as a result, all or
substantially all of the Partnership's assets are at risk of
trading loss. Unlike an operating company, the risk of market-
sensitive instruments is inherent to the primary business
activity of the Partnership.

The futures, forwards, and options traded by the Partnership
involve varying degrees of related market risk. Market risk is
often dependent upon changes in the level or volatility of
interest rates, exchange rates, and prices of financial
instruments and commodities, factors that result in frequent
changes in the fair value of the Partnership's open positions,
and consequently in its earnings, whether realized or unrealized,
and cash flow. Gains and losses on open positions of exchange-
traded futures, forwards, and options are settled daily through
variation margin. Gains/losses on off-exchange-traded forward
currency contracts are settled at the termination of the contract
or more frequently, as agreed upon with each counterparty.

The Partnership's total market risk may increase or
decrease as it is influenced by a wide variety of factors,
including, but not limited to, the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets.

The Partnership's past performance is no guarantee of its future
results. Any attempt to numerically quantify the Partnership's
market risk is limited by the uncertainty of its speculative
trading. The Partnership's speculative trading may cause future
losses and volatility (i.e., "risk of ruin") that far exceed the
Partnership's experience to date or any reasonable expectations
based upon historical changes in market value.

Limited partners will not be liable for losses exceeding the
current net asset value of their investment.

Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partner-
ship's market risk exposures contain "forward-looking statements"
within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities Litigation
Reform Act of 1995 (set forth in Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934). All quantitative disclosures in this section are deemed
to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.

The Partnership accounts for open positions on the basis of mark
to market accounting principles. Any loss in the market value of
the Partnership's open positions is directly reflected in the
Partnership's earnings and cash flow.

The Partnership's risk exposure in the market sectors traded by
the Trading Advisors is estimated below in terms of Value at Risk
("VaR"). The Partnership estimates VaR using a model based upon
historical simulation (with a confidence level of 99%) which
involves constructing a distribution of hypothetical daily
changes in the value of a trading portfolio. The VaR model takes
into account linear exposures to risk including equity and
commodity prices, interest rates, foreign exchange rates, and
correlation among these variables. The hypothetical changes in
portfolio value are based on daily percentage changes observed in
key market indices or other market factors ("market risk
factors") to which the portfolio is sensitive. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days,
or one day in 100. VaR typically does not represent the worst
case outcome. Demeter uses approximately four years of daily
market data (1,000 observations) and revalues its portfolio
(using delta-gamma approximations) for each of the
historical market moves that occurred over this time period.
This generates a probability distribution of daily "simulated
profit and loss" outcomes. The VaR is the appropriate percentile
of this distribution. For example, the 99% one-day VaR would
represent the 10th worst outcome from Demeter's simulated profit
and loss series.

The Partnership's VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
contract and do not distinguish between exchange and non-exchange
dealer-based instruments. They are also not based on exchange
and/or dealer-based maintenance margin requirements.

VaR models, including the Partnership's, are continually evolving
as trading portfolios become more diverse and modeling techniques
and systems capabilities improve. Please note that the VaR model
is used to numerically quantify market risk for historic
reporting purposes only and is not utilized by either Demeter or
the Trading Advisors in their daily risk management activities.
Please further note that VaR as described above may not be
comparable to similarly titled measures used by other entities.

The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at June 30, 2004 and 2003.
At June 30, 2004 and 2003, the Partnership's total capitalization
was approximately $221 million and $138 million, respectively.
Primary Market June 30, 2004 June 30, 2003
Risk Category Value at Risk Value at Risk
Currency (0.88)% (1.44)%

The VaR for a market category represents the one-day downside
risk for the aggregate exposures associated with this market
category. Because the business of the Partnership is the
speculative trading of futures, forwards, and options, the
composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day,
which could positively or negatively materially impact market
risk as measured by VaR.

The table below supplements the quarter-end VaR set forth above
by presenting the Partnership's high, low, and average VaR, as a
percentage of total net assets for the four quarter-end reporting
periods from July 1, 2003 through June 30, 2004.

Primary Market Risk Category High Low Average
Currency (2.60)% (0.84)% (1.72)%

Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
typically found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, give
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
? past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
? changes in portfolio value caused by market movements may
differ from those of the VaR model;
? VaR results reflect past market fluctuations applied to current
trading positions while future risk depends on future
positions;
? VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and

? the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

The VaR tables provided present the results of the Partnership's
VaR for its market risk exposures at June 30, 2004 and 2003, and
for the four quarter-end reporting periods from July 1, 2003
through June 30, 2004. VaR is not necessarily representative of
the Partnership's historic risk, nor should it be used to predict
the Partnership's future financial performance or its ability to
manage or monitor risk. There can be no assurance that the
Partnership's actual losses on a particular day will not exceed
the VaR amounts indicated above or that such losses will not
occur more than once in 100 trading days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. The Partnership did not have any
foreign currency balances at June 30, 2004.

The Partnership also maintains a substantial portion
(approximately 102% as of June 30, 2004) of its available assets
in cash at Morgan Stanley DW. A decline in short-term interest
rates would result in a decline in the Partnership's cash
management income. This cash flow risk is not considered
to be material.

Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality, and multiplier features of the Partnership's market-
sensitive instruments, in relation to the Partnership's net
assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures, as well as the strategies used and to be used by
Demeter and the Trading Advisors for managing such exposures, are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expropria-
tions, illiquid markets, the emergence of dominant fundamental
factors, political upheavals, changes in historical price
relationships, an influx of new market participants,
increased regulation, and many other factors could result in
material losses, as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.

The following was the only trading risk exposure of the
Partnership at June 30, 2004. It may be anticipated, however,
that market exposure will vary materially over time.

Currency. The Partnership's currency market exposure at June 30,
2004 was to exchange rate fluctuations, primarily fluctuations
which disrupt the historical pricing relationships between
different currencies and currency pairs. Interest rate changes,
as well as political and general economic conditions influence
these fluctuations. At June 30, 2004, the Partnership's exposure
was to outright U.S. dollar positions. Outright positions
consist of the U.S. dollar vs. other currencies. These other
currencies include major and minor currencies. Demeter does not
anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
At June 30, 2004, there was no non-trading risk exposure because
the Partnership did not have any foreign currency balances.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisors, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different Trading Advisors, each of
whose strategies focus on different trading approaches, and by
monitoring the performance of the Trading Advisors daily. In
addition, the Trading Advisors establish diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.

Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisors.

Item 4. CONTROLS AND PROCEDURES
(a) As of the end of the period covered by this quarterly
report, the President and Chief Financial Officer of
Demeter, the general partner of the Partnership, have
evaluated the effectiveness of the Partnership's
disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act), and have
judged such controls and procedures to be effective.

(b) There have been no significant changes during the
period covered by this quarterly report in the
Partnership's internal controls or in other factors
that could significantly affect these controls
subsequent to the date of their evaluation.
PART II. OTHER INFORMATION

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership initially registered 12,000,000 Units pursuant to
a Registration Statement on Form S-1, which became effective on
March 6, 2000 (SEC File Number 333-90483).

The Partnership registered an additional 1,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on April 30, 2002 (SEC File Number 333-84654).

The Partnership registered an additional 14,000,000 Units
pursuant to another Registration Statement on Form S-1, which
became effective on April 28, 2003 (SEC File Number 333-104004).

The Partnership registered an additional 25,000,000 Units
pursuant to another Registration Statement on Form S-1, which
became effective on April 28, 2004 (SEC file Number 333-113393).

The managing underwriter for the Partnership is Morgan Stanley
DW.

Units are continuously sold at monthly closings at a purchase
price equal to 100% of the net asset value per Unit as of the
close of business on the last day of each month.

Through June 30, 2004, 19,461,462.071 Units were sold,
leaving 32,538,537.929 Units unsold. The aggregate price of
the Units sold through June 30, 2004 was $260,911,466.

Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the "Use of
Proceeds" section of the prospectus included as part of the above
referenced Registration Statements.

Item 5. OTHER INFORMATION
Management. Effective June 21, 2004, the following changes have
been made to the Board of Directors and Officers of Demeter:

Mr. Jeffrey D. Hahn resigned the position of Chief Financial
Officer and Director of Demeter.

Mr. Todd Taylor, age 41, is a Director of Demeter. Mr. Taylor
began his career with Morgan Stanley in June 1987 as a Financial
Advisor in the Dallas office. In 1995, he joined the Management
Training Program in New York and was appointed Branch Manager in
St. Louis in 1997. Three years later, in 2000, Mr. Taylor was
appointed to a newly created position, Director of Individual
Investor Group ("IIG") Learning and Development, before becoming
the Director of IIG Strategy in 2002. Most recently, Mr. Taylor
has taken on a new role as the High Net Worth Segment Director.
Currently a member of the firm's E-Learning Council, Mr.
Taylor is also a current member of the Securities
Industry/Regulatory Council on Continuing Education. Mr. Taylor
graduated from Texas Tech University with a B.B.A. in Finance.

Mr. William D. Seugling, age 34, will become a Director of
Demeter once he has registered with the National Futures
Association ("NFA") as a principal, which registration is
currently pending. Mr. Seugling is an Executive Director at
Morgan Stanley and currently serves as Director of Client
Solutions for US Private Wealth Management. Mr. Seugling joined
Morgan Stanley in June 1993 as an Associate in Equity Structured
Products having previously worked in research and consulting for
Greenwich Associates from October 1991 to June 1993. Since 1994,
he has focused broadly on analysis and solutions for wealthy
individuals and families culminating in his current role within
the division. He was named Vice President in 1996 and an
Executive Director in 1999. Mr. Seugling graduated cum laude
from Bucknell University with a B.S. in Management and a
concentration in Chemistry.

Mr. Kevin Perry, age 35, is the Chief Financial Officer of
Demeter. His registration with the NFA as a principal is
currently pending. He currently serves as an Executive Director
and Controller of Client Solutions at Morgan Stanley. Mr. Perry
joined Morgan Stanley in October 2000 and is also Chief
Financial Officer of Morgan Stanley Trust National Association,
Van Kampen Funds Inc. and Morgan Stanley Distribution, Inc.
Prior to joining Morgan Stanley, Mr. Perry worked as an auditor
and consultant in the financial services practice of Ernst &
Young from October 1991 to October 2000. Mr. Perry received a
B.S. degree in Accounting from the University of Notre Dame in
1991 and is a Certified Public Accountant.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership, is incorporated by
reference to Exhibit A of the Partnership's Prospectus,
dated April 28, 2004, filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 on May 4, 2004.
3.02 Certificate of Limited Partnership, dated October 20,
1999, is incorporated by reference to Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File
No. 333-90485) filed with the Securities and Exchange
Commission on November 5, 1999.
3.03 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001, (changing its name
from Morgan Stanley Dean Witter Spectrum Currency L.P.)
is incorporated by reference to Exhibit 3.01 of the
Partnership's Form 8-K (File No. 0-31563) filed with the
Securities and Exchange Commission on November 1, 2001.
10.01 Management Agreement among the Partnership, Demeter and
John W. Henry & Company, Inc., dated as of March 6, 2000,
is incorporated by reference to Exhibit 10.01 of the
Partnership's Quarterly Report on Form 10-Q (File No.
0-31563) filed with the Securities and Exchange
Commission on November 14, 2000.
10.01(a) Amendment to Management Agreement, dated as of November
30, 2000, among the Partnership, John W. Henry & Company,
Inc., and Demeter is incorporated by reference to Exhibit
10.01 of the Partnership's Form 8-K (File No. 0-31563),
filed with the Securities and Exchange Commission on
January 3, 2001.
10.02 Management Agreement among the Partnership, Demeter and
Sunrise Capital Partners, LLC, dated as of March 6, 2000,
is incorporated by reference to Exhibit 10.02 of the
Partnership's Quarterly Report on Form 10-Q (File No.
0-31563) filed with the Securities and Exchange
Commission on November 14, 2000.
10.02(a) Amendment to Management Agreement, dated as of November
30, 2000, among the Partnership, Sunrise Capital
Partners, LLC, and Demeter is incorporated by reference
to Exhibit 10.02 of the Partnership's Form 8-K (File No.
0-31563), filed with the Securities and Exchange
Commission on January 3, 2001.

10.05 Amended and Restated Escrow Agreement among the
Partnership, Morgan Stanley Spectrum Select L.P., Morgan
Stanley Spectrum Technical L.P., Morgan Stanley Spectrum
Strategic L.P., Morgan Stanley Spectrum Global Balanced
L.P., Morgan Stanley Spectrum Commodity L.P., Morgan
Stanley DW, and The Chase Manhattan Bank, the escrow
agent, dated as of March 10, 2000, is incorporated by
reference to Exhibit 10.05 of the Partnership's
Registration Statement on Form S-1 (File No. 333-90485)
filed with the Securities and Exchange Commission on
November 2, 2001.
10.06 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units is
incorporated by reference to Exhibit B of the
Partnership's Prospectus dated April 28, 2004, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 on May 4, 2004.
10.08 Form of Subscription Agreement Update Form to be executed
by each purchaser of Units is incorporated by reference
to Exhibit C of the Partnership's Prospectus, dated April
28, 2004, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 on May 4, 2004.
10.09 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW, dated as of June 30,
2000, is incorporated by reference to Exhibit 10.01 of
the Partnership's Form 8-K (File No. 0-31563) filed with
the Securities and Exchange Commission on November 1,
2001.
10.10 Commodity Futures Customer Agreement between MS & Co. and
the Partnership, and acknowledged and agreed to by Morgan
Stanley DW, dated as of June 6, 2000, is incorporated by
reference to Exhibit 10.02 of the Partnership's Form 8-K
(File No. 0-31563) filed with the Securities and Exchange
Commission on November 1, 2001.
10.11 Foreign Exchange and Options Master Agreement between MS
& Co. and the Partnership, dated as of June 30, 2000, is
incorporated by reference to Exhibit 10.04 of the
Partnership's Form 8-K (File No. 0-31563) filed with the
Securities and Exchange Commission on November 1, 2001.
10.12 Securities Account Control Agreement among the
Partnership, MS & Co., and Morgan Stanley DW, dated as of
June 6, 2000, is incorporated by reference to Exhibit
10.03 of the Partnership's Form 8-K (File No. 0-31563)
filed with the Securities and Exchange Commission
on November 1, 2001.
31.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to rules 13a-15(e) and 15d-15(e), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to rules 13a-15(e) and 15d-15(e),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

(B) Reports on Form 8-K - None.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Morgan Stanley Spectrum Currency L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

August 16, 2004 By:/s/ Kevin Perry
Kevin Perry
Chief Financial Officer

The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.

- - 7 -
- - 10 -

MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)