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 September 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
330 Madison Avenue, 8th Floor
New York, NY 10017
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 905-2700

825 Third Avenue, 9th Floor, New York, NY 10022

(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

September 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 CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 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

September 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. Monthly, Morgan Stanley DW
pays the Partnership interest income equal to 80% of its average
daily Net Assets for the month at 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

MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
influence the market value of these contracts, including interest
rate volatility.

The market value of exchange-traded contracts is based on the
settlement price quoted by the exchange on the day with respect
to which market value is being determined. If an exchange-traded
contract could not have been liquidated on such day due to the
operation of daily limits or other rules of the exchange, the
settlement price shall be the settlement price on the first
subsequent day on which the contract could be liquidated. The
market value of off-exchange-traded contracts is based on the
fair market value quoted by the counterparty.

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;

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

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.

The net unrealized gains 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
on Open Contracts Longest Maturities

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

Sep. 30, 2004 - 8,051 8,051 - Dec. 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 trades is limited to the amounts reflected
in the Partnership's Statements of Financial Condition.

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

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 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
variation in value nor is there any requirement that an amount
equal to the net unrealized gains (losses) on open forward
contracts be segregated. However, the Partnership is required to
meet margin requirements equal to the net unrealized loss on open
contracts in the Partnership accounts with the counterparty which
is accomplished by daily maintenance of the cash balance in a
custody account held at Morgan Stanley DW for the benefit of MS &
MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

Co. 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 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 expects to
have, any capital assets. Redemptions, exchanges, and sales of
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
program 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 nine month
periods ended September 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. 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 Three and Nine Months Ended September 30, 2004
The Partnership recorded losses net of interest income totaling
$19,847,451 and expenses totaling $3,549,722, resulting in a net
loss of $23,397,173 for the three months ended September 30,
2004. The Partnership's net asset value per Unit decreased from
$12.93 at June 30, 2004 to $11.58 at September 30, 2004.

The most significant trading losses of approximately 2.8%
resulted from both long and short positions in the euro versus
the U.S. dollar during August as the euro experienced significant
short-term volatility due to conflicting economic data out of
Europe and the U.S., and volatile energy prices throughout a
majority of the month. Losses of approximately 2.0% were
recorded from short positions in the Japanese yen versus the U.S.
dollar during August as the dollar's value declined under
pressure from concerns for the rate of U.S. economic growth, soft
economic data, and record-high oil prices. During September,
short Japanese yen positions against the U.S. dollar provided
further losses as the dollar's value weakened due to rising oil
prices that fueled fears of sluggish economic growth in the U.S.
Additional losses of approximately 1.6% and 1.4%, respectively,
were incurred from long positions in the South African
rand and Australian dollar versus the U.S. dollar during July as
the dollar reversed higher in response to upbeat market sentiment
and a jump in July consumer confidence data. During August, long
South African rand positions experienced further losses as its
value moved lower against the U.S. dollar due to a reduction in
South African interest rates by the Reserve Bank of South Africa.
Further Partnership losses of approximately 1.0% resulted from
long positions in the British pound positions versus the U.S.
dollar during July and short British pound positions during
September. Finally, losses of approximately 0.9% stemmed from
short positions in the Swiss franc versus the U.S. dollar during
August and September due to a declining U.S. dollar and rising
oil prices.

The Partnership recorded losses net of interest income totaling
$53,000,803 and expenses totaling $10,680,859, resulting in a net
loss of $63,681,662 for the nine months ended September 30, 2004.
The Partnership's net asset value per Unit decreased from $15.66
at December 31, 2003 to $11.58 at September 30, 2004.

The most significant trading losses of approximately 7.8% and
2.2%, 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 Japanese 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 against most currencies following the release of
stronger-than-expected U.S. jobs data, thereby, causing losses.
The Japanese 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 against the
U.S. dollar 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
U.S. economic data. During June, short Asian currency positions
experienced losses again due to the Japanese yen's rise prompted
by better-than-anticipated improvements in Japanese economic
data. The Japanese 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. During August and September,
short Japanese yen positions experienced losses as the dollar's
value declined under pressure from concerns for the rate of U.S.
economic growth, soft economic data and record-high oil prices.
Additional Partnership losses of approximately 5.8% and 1.9%,
respectively, stemmed from positions in the South African rand
and Australian dollar versus the U.S. dollar. During January and
February, long South African rand positions declined amid
expectations for weaker gold prices caused by improvements in the
global economy during 2004. During April, long South
African rand positions versus the U.S. dollar experienced losses
as the dollar's value moved higher versus these, and most other,
currencies. During May, short South African rand positions
incurred losses as the commodity-linked currency reversed higher
in response to rising gold prices. During July, the U.S.
dollar's upward reversal caused by upbeat market sentiment and
positive consumer confidence data caused losses for long
positions in the South African rand and Australian dollar.
During August, long South African rand positions experienced
further losses as its value moved lower against the U.S. dollar
due to a reduction in interest rates by the Reserve Bank of South
Africa. Long positions in the Norwegian krone versus the U.S.
dollar incurred losses of approximately 3.2% as the value of the
dollar temporarily moved higher in response to a decline in U.S.
unemployment claims. Losses of approximately 3.0% were incurred
primarily during the third quarter from both long and short
positions in the euro versus the U.S. dollar as the euro
experienced significant volatility due to conflicting economic
data out of Europe and the U.S. combined with volatile energy
prices throughout the quarter. Finally, Partnership losses of
approximately 1.9% were experienced from short positions in the
Mexican peso versus the U.S. dollar, primarily during the first
quarter, as the Mexican peso reversed higher in response to
encouraging signs of a recovery in the Mexican economy.

For the Three and Nine Months Ended September 30, 2003
The Partnership recorded losses net of interest income totaling
$5,055,352 and expenses totaling $2,311,978, resulting in a net
loss of $7,367,330 for the three months ended September 30, 2003.
The Partnership's net asset value per Unit decreased from $14.93
at June 30, 2003 to $14.14 at September 30, 2003.

The most significant trading losses of approximately 3.4%
resulted from short positions in the euro and Swiss franc versus
the U.S. dollar during September as the dollar's value sunk after
the release of several weak U.S. economic reports prompted fears
of an unsustainable U.S. economic recovery. Additional losses of
approximately 2.1% were recorded from long positions in the
Australian dollar versus the U.S. dollar primarily during July
amid rising expectations for a U.S. economic recovery, negative
economic data out of Australia and narrowing interest rate
differentials between the two countries. A portion of the
Partnership's losses for the quarter was offset by gains of
approximately 1.9% recorded from long positions in the Japanese
yen versus the U.S. dollar during September as the yen's value
was buoyed by Bank of Japan comments regarding its passive
currency intervention policy and perceptions that the Japanese
economic crisis was finally at a turning point. Gains of
approximately 1.6% were supplied by long positions in the Thai
baht versus the U.S. dollar during August and September as the
Thai baht's value increased in response to the improving Thailand
economy and the rise in value of the Japanese yen.
Additional gains of approximately 1.3% resulted from long
positions in the South African rand versus the U.S. dollar during
August and September as the value of the South African rand was
lifted by strong South African export data, a high South African
interest rate environment, and weaker U.S. equity prices.

The Partnership recorded revenues including interest income
totaling $7,907,909 and expenses totaling $8,345,976, resulting
in a net loss of $438,067 for the nine months ended September 30,
2003. The Partnership's net asset value per Unit increased from
$13.93 at December 31, 2002 to $14.14 at September 30, 2003. The
net asset value per Unit increased despite the Partnership's net
loss for the period since the net loss per Unit amount, incurred
in the later months of the nine month period, was not in excess
of the net income per Unit amount incurred in the earlier months
of the nine months period because the later losses were spread
over a larger number of Units due to subscriptions increasing the
Partnership's total number of Units each month.

The most significant trading gains of approximately 10.7% 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 interest, and investor preference for non-U.S. assets.
During January and April, gains were recorded 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 5.0% resulted from long
positions in the Australian dollar versus the U.S. dollar as the
Australian currency strengthened during April, May, and June 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. Gains of
approximately 2.0% were provided by long positions in the South
African rand versus the U.S. dollar during April as the South
African rand's value strengthened in response to significant
interest rate differentials between the two countries. Smaller
profits of approximately 1.6% were experienced from long
positions in the Thai baht versus the U.S. dollar primarily
during September as the Thai baht's value appreciated in tandem
with the value of the Japanese yen. A portion of the
Partnership's overall gains was offset by losses of approximately
4.1% from positions in the British pound versus the U.S. dollar
as the value of the pound strengthened during April and May on
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 positions in the British pound versus the U.S. dollar as the
British pound'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 Union. Additional losses
of approximately 2.0% resulted from long positions in the
Japanese yen versus the U.S. dollar during May as the Japanese
yen's value first strengthened and then reversed lower on
speculation that the Bank of Japan favored a weaker yen in order
to spur economic activity. During August, losses resulted from
short positions in the Japanese yen as the Asian currency
strengthened on stronger equity prices and the Bank of Japan's
commitment to its monetary policy.
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 and losses on off-exchange-traded
forward currency contracts are settled upon termination of the
contract, however, the Partnership is required to meet margin
requirements equal to the net unrealized loss on open contracts
in Partnership accounts with the counterparty, which is
accomplished by daily maintenance of the cash balance in a
custody account held at Morgan Stanley DW for the benefit of MS &
Co.

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 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 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 and use of
leverage may cause future losses and volatility (i.e., "risk of
ruin") that far exceed the Partnership's experience to date under
the "Partnership's Value at Risk in Different Market Sectors"
section and significantly exceed the Value at Risk ("VAR")
tables disclosed.

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 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 September 30, 2004 and 2003.
At September 30, 2004 and 2003, the Partnership's total
capitalization was approximately $210 million and $150 million,
respectively.

Primary Market September 30, 2004 September 30, 2003
Risk Category Value at Risk Value at Risk
Currency (1.55)% (2.57)%

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 October 1, 2003 through September 30, 2004.

Primary Market Risk Category High Low Average
Currency (2.60)% (0.84)% (1.47)%

Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio's aggregate market
risk exposure, incorporating a range of varied market risks;
reflect risk reduction due to portfolio diversification or
hedging activities; and can cover a wide range of portfolio
assets. However, VaR risk measures should be viewed in light of
the methodology's limitations, which include, but may not be
limited to 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.

In addition, the VaR tables above, as well as the past performance
of the Partnership, give no indication of the Partnership's
potential "risk of ruin".

The VaR tables provided present the results of the Partnership's
VaR for its market risk exposure at September 30, 2004 and 2003,
and for the four quarter-end reporting periods from October 1,
2003 through September 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. The Partnership did not have any foreign currency
balances at September 30, 2004.
The Partnership also maintains a substantial portion
(approximately 103% as of September 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 expropriations, 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 September 30, 2004. It may be anticipated,
however, that market exposure will vary materially over time.

Currency. The Partnership's currency market exposure at
September 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 September 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 associated
with the Partnership's currency trades will change significantly
in the future.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
At September 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
Registration Statement on Form S-1 Units Registered
File Number

Initial Registration 12,000,000.000 March 6, 2000 333-90485
Additional Registration 1,000,000.000 April 30, 2002 333-84654
Additional Registration 14,000,000.000 April 28, 2003 333-104004
Additional Registration 25,000,000.000 April 28, 2004 333-113398
Total Units Registered 52,000,000.000

Units sold through 9/30/04 20,938,984.882
Units unsold through 9/30/04 31,061,015.118

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.

The aggregate price of the Units sold through September 30, 2004
was $278,505,303.

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 and the supplement included
as part of the above referenced Registration Statements.

Item 5. OTHER INFORMATION

Management. The following changes have been made to the Board
of Directors and Officers of Demeter:

Mr. Kevin Perry, Chief Financial Officer of Demeter, was confirmed
as a principal of Demeter by the National Futures Association on
September 3, 2004.

Mr. William D. Seugling, Director of Demeter, was confirmed as a
principal of Demeter by the National Futures Association on
October 11, 2004.

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)

November 15, 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)

1305: