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, 2009 or





o           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 SMITH BARNEY SPECTRUM CURRENCY L.P.(Exact
      name of registrant as specified in its charter)





Delaware
            
            13-4084211(State or other jurisdiction of
              incorporation or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)Demeter
      Management LLC522
      Fifth Avenue, 13th FloorNew
      York, NY
            
            10036(Address
      of principal executive offices)
            
            (Zip
      Code)





Registrant’s
      telephone number, including area code
            
            (212)
      296-1999





Morgan
Stanley Spectrum Currency L.P.


(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 o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes o  No o


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer x
            Smaller
      reporting company o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes 0  No
T

















MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


INDEX TO QUARTERLY REPORT ON
FORM 10-Q





September 30,
2009











PART I. FINANCIAL
    INFORMATIONItem
      1.
            Financial
      Statements (Unaudited)Statements
      of Financial Condition as of September 30, 2009 and December 31, 2008
            2Statements
      of Operations for the Three and Nine Months Ended September 30, 2009 and
      2008
            3Statements
      of Changes in Partners’ Capital for the Nine Months Ended September 30,
      2009 and 2008
            4Statements
      of Cash Flows for the Nine Months Ended September 30, 2009 and 2008
            5Condensed
      Schedules of Investments as of September 30, 2009 and December 31,
      2008
            6Notes
      to Financial Statements
            7-20Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            21-30Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            31-39Item
      4.
            Controls
      and Procedures
            39-40Item
      4T.
            Controls
      and Procedures
            40PART II. OTHER INFORMATIONItem
      1A.
            Risk
      Factors
            41Item
      6.
            Exhibits
            41











PART I.  FINANCIAL
INFORMATION


Item
1.  Financial
Statements





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


STATEMENTS
OF FINANCIAL CONDITION


(Unaudited)


September
      30,
            
            December
      31,2009
            
            2008ASSETS
            $
            
            $Trading
      Equity:Unrestricted
      cash
            64,508,911
            
            92,837,025Restricted
      cash
            –
            
            640,778Total
      cash
            64,508,911
            
            93,477,803Net
      unrealized gain (loss) on open contracts (MS&Co.)
            743,184
            
            (403,907)Options
      purchased (premiums paid $17,199 and $45,729,
respectively)
            6,781
            
            251Total
      Trading Equity
            65,258,876
            
            93,074,147Interest
      receivable (MS&Co.)
            2,655
            
            619Total
      Assets
            65,261,531
            
            93,074,766LIABILITIES
      AND PARTNERS’ CAPITALLiabilitiesRedemptions
      payable
            835,271
            
            4,139,379Accrued
      brokerage fees (MS&Co.)
            245,638
            
            356,847Accrued
      management fees
            106,799
            
            155,151Options
      written (premiums received $4,473 and $24,780,
    respectively)
            1,744
            
            251Total
      Liabilities
            1,189,452
            
            4,651,628Partners’
      CapitalLimited
      Partners (6,134,327.119 and 7,843,447.630 Units,
    respectively)
            63,428,191
            
            87,533,608General
      Partner (62,272.343 and 79,706.343 Units, respectively)
            643,888
            
            889,530Total
      Partners’ Capital
            64,072,079
            
            88,423,138Total
      Liabilities and Partners’ Capital
            65,261,531
            
            93,074,766NET
      ASSET VALUE PER UNIT
            10.34
            
            11.16




















The
accompanying notes are an integral part of these financial
statements.





- 2
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


STATEMENTS
OF OPERATIONS


(Unaudited)


For
      the Three Months
              Ended September 30,
            
            For
      the Nine Months
              Ended September 30,2009
            
            2008
            
            2009
            
            2008$
            
            $
            
            $
            
            $INVESTMENT
      INCOMEInterest
      income (MS&Co.)
            16,141
            
            285,568
            
            54,701
            
            1,075,540EXPENSESBrokerage
      fees (MS&Co.)
            766,518
            
            1,096,425
            
            2,563,333
            
            3,484,538Management
      fees
            333,269
            
            476,707
            
            1,114,493
            
            1,515,017Incentive
      fees
            –
            
            74,362
            
            –
            
            355,472Total
      Expenses
            1,099,787
            
            1,647,494
            
            3,677,826
            
            5,355,027NET
      INVESTMENT LOSS
            (1,083,646)
            
            (1,361,926)
            
            (3,623,125)
            
            (4,279,487)TRADING
      RESULTSTrading
      profit (loss):Realized
            (2,000,792)
            
            1,118,972
            
            (3,320,751)
            
            6,190,925Net
      change in unrealized
            595,155
            
            (2,578,209)
            
            1,160,351
            
            1,076,268Total
      Trading Results
            (1,405,637)
            
            (1,459,237)
            
            (2,160,400)
            
            7,267,193NET
      INCOME (LOSS)
            (2,489,283)
            
            (2,821,163)
            
            (5,783,525)
            
            2,987,706NET
      INCOME (LOSS) ALLOCATIONLimited
      Partners
            (2,464,021)
            
            (2,789,588)
            
            (5,725,131)
            
            2,956,606General
      Partner
            (25,262)
            
            (31,575)
            
            (58,394)
            
            31,100NET
      INCOME (LOSS) PER UNITLimited
      Partners
            (0.39)
            
            (0.30)
            
            (0.85)
            
            0.25General
      Partner
            (0.39)
            
            (0.30)
            
            (0.85)
            
            0.25Units
            
            Units
            
            Units
            
            UnitsWEIGHTED
      AVERAGE NUMBEROF
      UNITS OUTSTANDING
            6,334,775.845
            
            9,183,143.160
            
            6,835,176.096
            
            9,816,229.721
































The
accompanying notes are an integral part of these financial
statements.





– 3
–





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


STATEMENTS
OF CHANGES IN PARTNERS’ CAPITAL


For the
Nine Months Ended September 30, 2009 and 2008


(Unaudited)











Units
      ofPartnership
            
            Limited
            
            GeneralInterest
            
            Partners
            
            Partner
            
            Total$
            
            $
            
            $Partners’
      Capital,December
      31, 2007
            10,912,868.181
            
            106,178,308
            
            1,149,436
            
            107,327,744Offering
      of Units
            267,587.496
            
            2,742,598
            
            –
            
            2,742,598Net
      Income
            –
            
            2,956,606
            
            31,100
            
            2,987,706Redemptions
            (2,265,928.852)
            
            (22,924,730)
            
            (197,624)
            
            (23,122,354)Partners’
      Capital,September
      30, 2008
            8,914,526.825
            
            88,952,782
            
            982,912
            
            89,935,694Partners’
      Capital,December
      31, 2008
            7,923,153.973
            
            87,533,608
            
            889,530
            
            88,423,138Net
      Loss
            –
            
            (5,725,131)
            
            (58,394)
            
            (5,783,525)Redemptions
            (1,726,554.511)
            
            (18,380,286)
            
            (187,248)
            
            (18,567,534)Partners’
      Capital,September
      30, 2009
            6,196,599.462
            
            63,428,191
            
            643,888
            
            64,072,079





















































The
accompanying notes are an integral part of these financial
statements.








- 4
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


STATEMENTS
OF CASH FLOWS


(Unaudited)





For the Nine Months Ended September
      30,2009
            
            2008$
            
            $CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income (loss)
            (5,783,525)
            
            2,987,706Noncash
      item included in net income (loss):Net
      change in unrealized
            (1,160,351)
            
            (1,076,268)(Increase)
      decrease in operating assets:Restricted
      cash
            640,778
            
            1,857,838Net
      premiums paid for options purchased
            28,530
            
            (283,913)Interest
      receivable (MS&Co.)
            (2,036)
            
            171,314Decrease
      in operating liabilities:Accrued
      brokerage fees (MS&Co.)
            (111,209)
            
            (85,806)Accrued
      management fees
            (48,352)
            
            (37,307)Net
      premiums received from options written
            (20,307)
            
            (180,942)Net
      cash provided by (used for) operating activities
            (6,456,472)
            
            3,352,622CASH
      FLOWS FROM FINANCING ACTIVITIESCash
      received from offering of Units
            –
            
            3,064,278Cash
      paid for redemptions of Units
            (21,871,642)
            
            (26,058,264)Net
      cash used for financing activities
            (21,871,642)
            
            (22,993,986)Net
      decrease in unrestricted cash
            (28,328,114)
            
            (19,641,364)Unrestricted
      cash at beginning of period
            92,837,025
            
            110,971,546Unrestricted
      cash at end of period
            64,508,911
            
            91,330,182















































The
accompanying notes are an integral part of these financial
statements.





- 5
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


CONDENSED
SCHEDULES OF INVESTMENTS


September
30, 2009 and December 31, 2008 (Unaudited)





Futures and Forward
    Contracts
            Long
      Unrealized
              Gain
            Percentage
      of
              Net Assets
            Short  Unrealized
              Loss
            Percentage
      of
              Net Assets
            Net
      Unrealized
              Gain$
            %
            $
            %
            $September
      30, 2009, Partnership Net Assets: $64,072,079Foreign
      currency
            1,007,973
            1.57
            (340,176)
            (0.53)
            667,797Grand
      Total:
            1,007,973
            1.57
            (340,176)
            (0.53)
            667,797Unrealized
      Currency Gain
            
            
            
            0.12
            75,387Total
      Net Unrealized Gain on Open Contracts
            
            
            
            
            743,184Option Contracts
            Fair Value
            Percentage
      of
              Net Assets$
            %Options
      purchased on Futures Contracts
            –
            –Options
      purchased on Forward Contracts
            6,781
            0.01Options
      written on Futures Contracts
            –
            –Options
      written on Forward Contracts
            (1,744)
            –Futures and Forward
    Contracts
            Long
      Unrealized
              Gain
            Percentage
      of
              Net Assets
            Short  Unrealized
              Loss
            Percentage
      of
              Net Assets
            Net
      Unrealized
              Gain/(Loss)$
            %
            $
            %
            $December
      31, 2008, Partnership Net Assets: $88,423,138Foreign
      currency
            79,116
            0.09
            (613,982)
            (0.69)
            (534,866)Grand
      Total:
            79,116
            0.09
            (613,982)
            (0.69)
            (534,866)Unrealized
      Currency Gain
            
            
            
            0.15
            130,959Total
      Net Unrealized Loss on Open Contracts
            
            
            
            
            (403,907)Option Contracts
            Fair Value
            Percentage
      of
              Net Assets$
            %Options
      purchased on Futures Contracts
            –
            –Options
      purchased on Forward Contracts
            251
            –Options
      written on Futures Contracts
            –
            –Options
      written on Forward Contracts
            (251)
            –





























The
accompanying notes are an integral part of these financial
statements.





- 6
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS





September
30, 2009





(Unaudited)





The
unaudited financial statements contained herein include, in the opinion of
management, all adjustments necessary for a fair presentation of the financial
condition and results of operations of Morgan Stanley Smith Barney Spectrum
Currency L.P. (formerly, Morgan Stanley Spectrum Currency L.P.)  (the
"Partnership").  The financial statements and condensed notes herein
should be read in conjunction with the Partnership’s Annual Report on Form 10-K
for the fiscal year ending December 31, 2008.





1.  Organization


Morgan
Stanley Smith Barney Spectrum Currency L.P. (formerly, Morgan Stanley Spectrum
Currency L.P.) is a Delaware limited partnership organized in 1994 to engage
primarily in the speculative trading of futures contracts, options on futures
and forward contracts, and forward contracts on physical commodities and other
commodity interests, including, but not limited to, foreign currencies,
financial instruments, metals, energy, and agricultural products (collectively,
"Futures Interests") (refer to Note 4. Financial
Instruments).  The Partnership is one of the Morgan Stanley
Smith Barney Spectrum series of funds, comprised of the Partnership, Morgan
Stanley Smith Barney Spectrum Global Balanced L.P., Morgan Stanley Smith Barney
Spectrum Select L.P., Morgan Stanley Smith Barney Spectrum Strategic L.P., and
Morgan Stanley Smith Barney Spectrum Technical L.P. (collectively, the "Spectrum
Series").




















- 7
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





Effective
September 29, 2009, Demeter Management LLC (“Demeter”), the general partner of
the Partnership, changed the name of Morgan Stanley Spectrum Currency L.P. to
Morgan Stanley Smith Barney Spectrum Currency L.P.





The
Partnership may buy or write put and call options through listed exchanges and
the over-the-counter market.  The buyer of an option has the right to
purchase (in the case of a call option) or sell (in the case of a put option) a
specified quantity of a specific Futures Interest or underlying asset at a
specified price prior to or on a specified expiration date.  The
writer of an option is exposed to the risk of loss if the market price of the
Futures Interest on the underlying asset declines (in the case of a put option)
or increases (in the case of a call option).  The writer of an option
can never profit by more than the premium paid by the buyer but can lose an
unlimited amount.





Premiums
received/premiums paid from writing/purchasing options are recorded as
liabilities/assets on the Statements of Financial Condition and are subsequently
adjusted to fair values.  The difference between the fair value of the
option and the premiums received/premiums paid is treated as an unrealized gain
or loss.





The
Partnership’s general partner is Demeter. The commodity broker is Morgan Stanley
& Co. Incorporated ("MS&Co.").  MS&Co. also acts as the
counterparty on all trading of foreign currency forward contracts. Morgan
Stanley Capital Group Inc. ("MSCG") acts as the counterparty on all trading of
options on foreign currency forward contracts.  Demeter is a
wholly-owned subsidiary of Morgan Stanley Smith Barney Holdings LLC
(“MSSB”).  MSSB is majority-owned indirectly by Morgan Stanley and
minority-owned indirectly





- 8
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





by
Citigroup Inc.  MS&Co. and MSCG are wholly-owned subsidiaries of
Morgan Stanley.  The trading advisors to the Partnership are C-View
International Limited, DKR Fusion Management L.P., FX Concepts Trading Advisor,
Inc., John W. Henry & Company, Inc., and Sunrise Capital Partners, LLC (each
individually, a "Trading Advisor", or collectively, the "Trading
Advisors").





On July
1, 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles(“GAAP”), also known as FASB Accounting Standards Codification (“ASC”)
105-10, Generally Accepted
Accounting Principles(“ASC 105-10” or the
“Codification”).  ASC 105-10 established the exclusive authoritative
reference for U.S. GAAP for use in financial statements except for Securities
and Exchange Commission (“SEC”) rules and interpretive releases, which are also
authoritative GAAP for SEC registrants.  The Codification supersedes
all existing non-SEC accounting and reporting standards.  The
Codification became the single source of authoritative accounting principles
generally accepted in the United States and is effective for financial
statements issued for interim and annual periods ending after September 15,
2009.





2.  Related Party
Transactions


The
Partnership’s cash is on deposit with MS&Co. in futures, forward and options
trading accounts to meet margin requirements as needed.  At each month
end, MS&Co. pays the Partnership interest income on 80% of the funds on
deposit with the commodity broker at a rate equal to the monthly average of the
4-week U.S. Treasury bill discount





- 9
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Smith Barney Spectrum Currency L.P.


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





rate
during such month.  The Partnership pays brokerage fees to
MS&Co.  MSCG acts as the counterparty on all trading of options on
foreign currency forward contracts.





3.  Income
Taxes


No
provision for income taxes has been made in the accompanying financial
statements, as partners are individually responsible for reporting income or
loss based upon their respective share of the Partnership’s revenues or expenses
for income tax purposes. The Partnership files U.S. federal and state tax
returns.





ASC
740-10, Income Taxes
(which incorporates former FASB No. 109 and FASB Interpretation No. 48, Income Taxes), clarifies the
accounting for uncertainty in income taxes recognized in a Partnership's
financial statements, and prescribes a recognition threshold and measurement
attribute for financial statement recognition and measurement of a tax position
taken or expected to be taken.   The 2005 through 2008 tax
years generally remain subject to examination by U.S. federal and most state tax
authorities.





4.  Financial
Instruments


The
Partnership trades Futures Interests.  Futures and forwards represent
contracts for delayed delivery of an instrument at a specified date and
price.  Futures Interests are open commitments until settlement date,
at which time they are realized.  They are valued at fair value,
generally on a daily basis, and the unrealized gains and losses on open
contracts (the difference between contract trade price and market price) are
reported in the Statements of








- 10
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)








Financial
Condition as net unrealized gains or losses on open contracts.  The
resulting net change in unrealized gains and losses is reflected in the change
in unrealized trading profit (loss) on open contracts from one period to the
next on the Statements of Operations.  The fair value of
exchange-traded futures, options and forwards contracts is determined by the
various futures exchanges, and reflects the settlement price for each contract
as of the close of business on the last business day of the reporting
period.  The fair value of foreign currency forward contracts is
extrapolated on a forward basis from the spot prices quoted as of approximately
3:00 P.M. (E.T.) of the last business day of the reporting
period.  The fair value of non-exchange-traded foreign currency option
contracts is calculated by applying an industry standard model application for
options valuation of foreign currency options, using as input, the spot prices,
interest rates, and option implied volatilities quoted as of approximately 3:00
P.M. (E.T.) on the last business day of the reporting period.  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 fair value of these
contracts, including interest rate volatility.





The fair
value of exchange-traded contracts is based on the settlement price quoted by
the exchange on the day with respect to which fair 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 fair
value of off-exchange-traded contracts is based on the fair value quoted by the
counterparty.











- 11
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





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 as required by ASC 815-10-15, Derivate and
Hedging


(formerly,
SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities).  A derivative
is defined 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, swap or options contracts, and other
financial instruments with similar characteristics such as caps, floors, and
collars.





The net
unrealized gains (losses) on open contracts, reported as a component of "Trading
Equity" on the Statements of Financial Condition, and their longest contract
maturities were as follows:





Net Unrealized Gains/(Losses) on Open
      Contracts
            Longest MaturitiesDate
            Exchange-Traded
            Off-Exchange-Traded
            Total
            Exchange-Traded
            Off-Exchange-Traded$
            $
            $Sep.
      30, 2009
            –
            743,184
            743,184
            –
            Dec.
      2009Dec.
      31, 2008
            –
            (403,907)
            (403,907)
            –
            Apr.
      2009

















- 12
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





The
Partnership has credit risk associated with counterparty
non-performance.  As of the date of the financial statements, the
credit risk associated with the instruments in which the Partnership trades is
limited to the unrealized gain amounts reflected in the Partnership’s Statements
of Financial Condition.





The
Partnership also has credit risk because MS&Co. and/or MSCG acts as the
futures commission merchant or the counterparty, with respect to most of the
Partnership’s assets. Exchange-traded futures, exchange-traded forward, and
exchange-traded futures-styled options contracts are marked to market on a daily
basis, with variations in value settled on a daily basis. MS&Co., as a
commodity broker for the Partnership’s exchange-traded futures, exchange-traded
forward, and exchange-traded futures-styled options contracts, is required,
pursuant to regulations of the Commodity Futures Trading Commission ("CFTC"), to
segregate from their own assets, and for the sole benefit of its commodity
customers, all funds held by it with respect to exchange-traded futures,
exchange-traded forward, and exchange-traded futures-styled options contracts,
including an amount equal to the net unrealized losses on all open
exchange-traded futures, exchange-traded forward, and exchange-traded
futures-styled options contracts.  With respect to the Partnership’s
off-exchange-traded forward currency contracts and forward currency options
contracts, there are no daily settlements of variation in value, nor is there
any requirement that an amount equal to the net unrealized gains (losses) on
such contracts be segregated.  However, the Partnership is required to
meet margin requirements equal to the net unrealized loss on open forward
currency contracts in the Partnership accounts with the counterparty, which is
accomplished by daily maintenance of the cash balance in a custody account held
at MS&Co. With respect to those off-exchange-traded forward currency
contracts, the Partnership is at risk to the








- 13
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





ability
of MS&Co., the sole counterparty on all such contracts, to perform. With
respect to those off-exchange-traded forward currency options contracts, the
Partnership is at risk to the ability of MSCG, the sole counterparty on all such
contracts, to perform.   The Partnership has a netting agreement
with each counterparty.  These agreements, which seek to reduce both
the Partnership’s and the counterparties’ exposure on off-exchange-traded
forward currency contracts, including options on such contracts, should
materially decrease the Partnership’s credit risk in the event of MS&Co.’s
or MSCG’s bankruptcy or insolvency.





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, exchange-traded forward,
and exchange-traded futures-styled options contracts are settled daily through
variation margin.  Gains and losses on off-exchange-traded forward
currency contracts and forward currency options 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 forward
currency contracts in the Partnership accounts with the counterparty, which is
accomplished by daily maintenance of the cash balance in a custody account held
at MS&Co.














-  14
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)








5.  Derivative and
Hedging


ASC
815-10-65, Derivative and
Hedging(formerly, SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities- an amendment of SFAS No.
133), which was issued in March 2008, is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand how those
instruments and activities are accounted for; how and why they are used and
their effects on a Partnership’s financial position, financial performance, and
cash flows.  ASC 815-10-65 is effective as of January 1, 2009, for the
Partnership.





The
Partnership’s objective is to profit from speculative trading in Futures
Interests.  Therefore, the Trading Advisors for the Partnership will
take speculative positions in Futures Interests where they feel the best profit
opportunities exist for their trading strategy.  As such, the absolute
quantity (the total of the open long and open short positions) has been
presented as a part of the volume disclosure, as position direction is not an
indicative factor in such volume disclosures. In regards to foreign currency
forward trades, each notional quantity amount has been converted to an
equivalent contract based upon an industry convention.





The
following table summarizes the valuation of the Partnership’s investments as
required by ASC 815-10-65 as of September 30, 2009 and reflects the contracts
outstanding at such time.














- 15
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)











The
Effect of Trading Activities on the Statements of Financial Condition as of
September 30, 2009:


Futures and Forward
    Contracts
            Long
      Unrealized
              Gain
            Long
      Unrealized
              Loss
            Short
      Unrealized
              Gain
            Short
      Unrealized
              Loss
            Net   Unrealized
              Gain
            Total
      number of outstanding
              contracts
      (absolute quantity)$
            $
            $
            $
            $Foreign
      currency
            1,369,122
            (361,149)
            256,553
            (596,729)
            667,797
            5,183Total
            1,369,122
            (361,149)
            256,553
            (596,729)
            667,797Unrealized
      currency gain
            
            
            
            
            75,387Total
      net unrealized gain on open contracts
            
            
            
            
            743,184





Option
      Contracts at Fair ValueOptions
      purchased
            $6,781Options
      written
            $(1,744)





The
following tables summarize the net trading results of the Partnership during the
three and nine month periods as required by the disclosures about Derivative and
Hedging Topics of ASC 815-10-65.


The
Effect of Trading Activities on the Statements of Operations for the Three and
Nine Months Ended September 30, 2009 included in Total Trading
Results:


For
      the Three Months
            For
      the Nine MonthsEnded September 30,
      2009
            Ended September 30,
      2009Type of Instrument
            $
            $Foreign
      currency
            (1,390,087)
            (2,104,828)Unrealized
      currency loss
            (15,550)
            (55,572)Total
            (1,405,637)
            (2,160,400)





Line
Items on the Statements of Operations for the Three and Nine Months Ended
September 30, 2009:


For
      the Three Months
            For
      the Nine MonthsEnded September 30, 2009
            Ended September 30, 2009Trading Results
            $
            $Realized
            (2,000,792)
            (3,320,751)Net
      change in unrealized
            595,155
            1,160,351Total
      Trading Results
            (1,405,637)
            (2,160,400)








- 16
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





6.  Fair Value Measurements and
Disclosures


As
defined by ASC 820-10-55, Fair
Value Measurements and Disclosures(formerly, SFAS No. 157, Fair Value Measurements),
fair value is the amount that would be recovered when an asset is sold or an
amount paid to transfer a liability, in an ordinary transaction, between market
participants at the measurement date (exit price).  Market price
observability is impacted by a number of factors, including the types of
investments, the characteristics specific to the investment, and the state of
the market (including the existence and the transparency of transactions between
market participants).  Investments with readily available actively
quoted prices in an ordinary market will generally have a higher degree of
market price observability and a lesser degree of judgment used in measuring
fair value.





ASC
820-10-55 requires use of a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three levels: Level 1 -
unadjusted quoted market prices in active markets for identical assets and
liabilities; Level 2 - inputs other than unadjusted quoted market prices that
are observable for the asset or liability, either directly or indirectly
(including quoted prices for similar investments, interest rates, credit risk);
and Level 3 - unobservable inputs for the asset or liability (including the
Partnership’s own assumptions used in determining the fair value of
investments).





In
certain cases, the inputs used to measure fair value may fall into different
levels of the fair value hierarchy.  In such cases, an investment’s
level within the fair value hierarchy is based on the lowest level of input that
is significant to the fair value measurement.  The Partnership’s
assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment, and considers factors specific to
the investment.


- 17
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





The
following tables summarize the valuation of the Partnership’s investments by the
above ASC 820-10-55 fair value hierarchy as of September 30, 2009 and December
31, 2008:





September 30,
2009


Quoted
      Prices in Active Markets for Identical Assets
              (Level 1)
            Significant
      Other Observable Inputs
              (Level 2)
            Significant
      Unobservable Inputs
              (Level 3)
            
            Total$
            $
            
            
            $AssetsNet
      unrealized gain on open contracts
            –
            743,184
            n/a
            
            743,184Options
      purchased
            –
            6,781
            n/a
            
            6,781LiabilitiesOptions
      written
            –
            1,744
            n/a
            
            1,744


December 31,
2008


Quoted
      Prices in Active Markets for Identical Assets
              (Level 1)
            Significant
      Other Observable Inputs
              (Level 2)
            Significant
      Unobservable Inputs
              (Level 3)
            
            Total$
            $
            
            
            $AssetsNet
      unrealized loss on open contracts
            –
            (403,907)
            n/a
            
            (403,907)Options
      purchased
            –
            251
            n/a
            
            251LiabilitiesOptions
      written
            –
            251
            n/a
            
            251





























- 18
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)








7.  Recent Accounting
Pronouncements


(a)  Fair Value
Measurements


ASC
820-10-65, Fair Value
Measurements(formerly, FASB Staff Position (“FSP”) SFAS No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly), was issued
in April 2009.  ASC 820-10-65 provides additional guidance for
determining fair value and requires new disclosures regarding the categories of
fair value instruments, as well as the inputs and valuation techniques utilized
to determine fair value and any changes to the inputs and valuation techniques
during the period.  ASC 820-10-65 is effective for the interim and
annual periods ending after June 15, 2009.  The adoption of ASC
820-10-65 did not have a material impact on the Partnership’s financial
statements.





(b)  Financial
Instruments





ASC
825-10-65, Financial
Instruments (formerly, FSP SFAS No. 107-1 and Accounting Principals Board
No. 28-1, Interim Disclosures
About Fair Value of Financial Instruments),was issued in April 2009.ASC
825-10-65requires
fair value disclosures of financial instruments on a quarterly basis, as well as
new disclosures regarding the methodology and significant assumptions underlying
the fair value measures and any changes to the methodology and assumptions
during the reporting period.  ASC 825-10-65 is effective for the
interim and annual periods ending after June 15, 2009.  The adoption
of ASC 825-10-65 did not have a material impact on the Partnership’s financial
statements.








- 19
-





MORGAN
STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.


(formerly,
Morgan Stanley Spectrum Currency L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONCLUDED)








(c)  Subsequent
Events


The
Partnership adopted ASC 855-10, Subsequent Events (formerly,
SFAS No. 165, Subsequent
Events), which was issued in May 2009.  ASC 855-10 establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued.  It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date; that is, whether that date represents the date the financial statements
were issued or were available to be issued.  ASC 855-10 is effective
for the interim and annual periods ending after June 15,
2009.  Management has performed its evaluation of subsequent events
through November 13, 2009, the date these financial statements were issued, and
has determined that there were no subsequent events requiring adjustment or
disclosure in the financial statements.





8.  Restricted and Unrestricted
Cash


As
reflected on the Partnership’s Statements of Financial Condition, restricted
cash equals the cash portion of assets on deposit to meet margin requirements
plus the cash required to offset unrealized losses on foreign currency forwards
and options. All of these amounts are maintained separately.  Cash
that is not classified as restricted cash is therefore classified as
unrestricted cash.














- 20
-





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


OF
OPERATIONS





Liquidity.  The
Partnership deposits its assets with MS&Co. as its commodity broker in
separate futures, forward and options trading accounts established for each
Trading Advisor.  Such 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 movements 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.


- 21
-





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 does it expect
to have, any capital assets.  Redemptions of units of limited
partnership interest (“Unit(s)”) in the future will affect the amount of funds
available for investments in futures, forwards and options in subsequent
periods.  It is not possible to estimate the amount, and therefore the
impact, of future outflows 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, forward and options markets.  The following presents a
summary of the Partnership’s operations for the three and nine month periods
ended September 30, 2009 and 2008, 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.





- 22
-





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 20 of this report are prepared in accordance with U.S. GAAP,
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 original
contract value 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 a foreign currency forward contract
is based on the spot rate as of the close of business.  Interest
income, as well as management fees, incentive fees, and brokerage fees of the
Partnership are recorded on an accrual basis.





For the Three and Nine
Months Ended September 30, 2009


The
Partnership recorded total trading results including interest income totaling
$(1,389,496) and expenses totaling $1,099,787, resulting in a net loss of
$2,489,283 for the three months ended September 30, 2009.  The
Partnership’s net asset value per Unit decreased from $10.72 on June 30, 2009 to
$10.34 at September 30, 2009.














- 23
-





The most
significant trading losses of approximately 0.9%, 0.8%, 0.5%, and 0.3%,
respectively, were incurred, primarily during July, from short positions in the
euro, Canadian dollar, Swedish krona, and Swiss franc versus the U.S. dollar as
the value of the U.S. dollar reversed lower against these currencies amid
investor belief that the U.S. Federal Reserve might keep U.S. interest rates at
historic lows.  Furthermore, the value of the euro climbed higher on
signs the recession in the Euro-Zone was abating after reports showed both
Germany and France’s economy grew in the second quarter, while German business
confidence and investor sentiment also showed improvement in
August.  During September, newly established long positions in the
Swiss franc and euro versus the U.S. dollar resulted in losses as the value of
these currencies reversed lower during the latter half of the month amid
concerns regarding the rapid appreciation of the euro at the meeting of G-20
leaders.  Additional losses of approximately 0.8% were recorded during
July from long positions in the Mexican peso versus the U.S. dollar as the value
of the Mexican peso declined during the first half of the month on concerns that
the Mexican economy might take longer to recover from a recession than investors
previously estimated.  During August, newly established short
positions in the Mexican peso versus the U.S. dollar incurred losses as the
value of the U.S. dollar was supported higher after reports revealed a rise in
U.S. durable goods orders and news that U.S. new home sales reached a
four-and-a-half year high in July.  A portion of the Partnership’s
losses in the third quarter was offset by gains of approximately 0.7% from long
positions in the New Zealand dollar versus the U.S. dollar as the value of the
New Zealand dollar trended higher in August and September after government
reports showed retail sales, consumer spending, and house prices in New Zealand
all rose more than expected, diminishing speculation that the Reserve Bank of
New Zealand might cut interest rates in the near future.  Gains of
approximately 0.3% and 0.3%, respectively, were experienced,
primarily











- 24
-





during
September, from long positions in the Brazilian real and Australian dollar
versus the U.S. dollar as the value of the U.S. dollar moved lower on
speculation that the U.S. Federal Reserve might keep borrowing rates low after
the U.S. central bank indicated that it remained committed to its quantitative
easing program. Additionally, the value of the Australian dollar moved higher in
the wake of stronger gold prices.  Additional gains of 0.2% were
achieved during August from long positions in the British pound versus the U.S.
dollar as the value of the British pound moved higher on news that U.K. consumer
confidence rose to the highest level in more than a year, while Bank of England
officials indicated inflation might remain low.  During September,
newly established short positions in the British pound versus the U.S. dollar
resulted in gains as the value of the British pound moved lower against its
major rivals after U.K. unemployment rose to the highest level in 14
years.





The
Partnership recorded total trading results including interest income totaling
$(2,105,699) and expenses totaling $3,677,826, resulting in a net loss of
$5,783,525 for the nine months ended September 30, 2009.  The
Partnership’s net asset value per Unit decreased from $11.16 at December 31,
2008 to $10.34 at September 30, 2009.





The most
significant trading losses of approximately 1.9%, 1.1%, and 1.1%, respectively,
were incurred, primarily during March and April, from short positions in the
euro, Canadian dollar, and Mexican peso versus the U.S. dollar as the value of
the U.S. dollar moved lower after a government report showed U.S. employers cut
fewer jobs than forecast, which reduced demand for the U.S. dollar as a “safe
haven” currency.  During June, further losses were incurred from long
positions in the euro and Canadian dollar versus the U.S. dollar as








- 25
-





the value
of the U.S. dollar reversed higher against these currencies amid speculation
that the U.S. Federal Reserve might raise interest rates following news that
U.S. payrolls fell less than expected in May.  Additional losses were
incurred during July from short positions in the euro versus the U.S. dollar as
the value of the euro climbed higher on signs the recession in the Euro-Zone was
abating after reports showed both Germany and France’s economy grew in the
second quarter.  During September, newly established long positions in
the euro versus the U.S. dollar resulted in losses as the value of the euro
reversed lower during the latter half of the month amid concerns regarding the
rapid appreciation of the euro at the meeting of G-20
leaders.  Meanwhile, losses were recorded during July from long
positions in the Mexican peso versus the U.S. dollar as the value of the Mexican
peso declined during the first half of the month on concerns that the Mexican
economy might take longer to recover from a recession than investors previously
estimated.  During August, newly established short positions in the
Mexican peso versus the U.S. dollar incurred losses as the value of the U.S.
dollar was supported higher after reports revealed a rise in U.S. durable goods
orders and news that U.S. new home sales reached a four-and-a-half year high in
July.  Additional losses of approximately 0.9% were incurred from long
positions in the Japanese yen versus the U.S. dollar as the value of the
Japanese yen moved lower against most of its rivals during January and February
due to speculation that the Bank of Japan might intervene to weaken the
currency, as well as on news that Japan’s trade deficit substantially increased.
Further losses were recorded during March and May from newly established short
positions in the Japanese yen versus the U.S. dollar as the value of the
Japanese yen reversed higher amid optimism that demand for the Japanese currency
might strengthen.  Losses were also experienced during June from long
positions in the Japanese yen versus the U.S. dollar as the value of the U.S.
dollar reversed higher amid the aforementioned speculation that the U.S. Federal
Reserve might raise interest rates following better-than-expected U.S. economic
data.  Both long and





- 26
-





short
positions in the Japanese yen versus the U.S. dollar resulted in losses as the
value of the Japanese yen moved without consistent direction during July and
August following conflicting economic data out of Japan.  Lastly,
losses of 0.9% were recorded from short positions in the Swiss franc versus the
U.S. dollar, primarily during March and May, as the value of the Swiss franc
moved higher against the U.S. dollar after better-than-expected economic data
out of Switzerland added to speculation that the Swiss economy might rebound
sooner than expected.  Losses were also incurred during July and
August from short positions in the Swiss franc versus the U.S. dollar as the
value of the U.S. dollar reversed lower against the Swiss franc amid investor
belief that the U.S. Federal Reserve might keep U.S. interest rates at historic
lows.  A portion of the Partnership’s losses in the first nine months
of the year was offset by gains of approximately 1.5%, 0.9%, 0.8%, and 0.6%,
respectively, experienced primarily during April, May, and September from long
positions in the Australian dollar, New Zealand dollar, South African rand, and
Brazilian real versus the U.S. dollar as the value of the U.S. dollar moved
lower against most of its rivals after a government report showed U.S. employers
cut fewer jobs than forecast, which reduced demand for the U.S. dollar as a
“safe haven” currency.  Additionally, the Australian dollar, New
Zealand dollar, South African rand, and Brazilian real moved higher amid rising
commodity prices.





For the Three and Nine
Months Ended September 30, 2008


The
Partnership recorded total trading results including interest income totaling
$(1,173,669) and expenses totaling $1,647,494, resulting in a net loss of
$2,821,163 for the three months ended September 30, 2008.  The
Partnership’s net asset value per Unit decreased from $10.39 at June 30, 2008 to
$10.09 at September 30, 2008.








- 27
-





The most
significant trading losses of approximately 1.0%, 0.9%, 0.3%, 0.3%, and 0.3%,
respectively, were incurred primarily during August from long positions in the
euro, Swiss franc, Australian dollar, South African rand, and Polish zloty
versus the U.S. dollar as the value of the U.S. dollar strengthened after U.S.
consumer confidence increased in August for a second consecutive month and due
to a higher-than-previously-estimated increase in Gross Domestic Product during
the second quarter of 2008. Meanwhile, the value of the euro decreased sharply
relative to the U.S. dollar after the European Central Bank left its benchmark
interest rate unchanged during August. Smaller losses were recorded during
September from newly established short positions in the euro versus the U.S.
dollar as the value of the euro reversed higher during the middle of the month
following news that the European Central Bank had injected additional liquidity
into money markets in an attempt to alleviate credit turmoil concerns.
Meanwhile, both short and long positions in the Swiss franc versus the U.S.
dollar incurred losses during September as the value of the Swiss franc moved
without consistent direction amid conflicting economic data out of Switzerland.
A portion of the Partnership’s losses in the third quarter was offset by gains
of approximately 0.7%, 0.6%, 0.3%, and 0.3%, respectively, experienced
throughout the quarter from short positions in the Taiwan dollar, New Zealand
dollar, Singapore dollar, and Korean won versus the U.S. dollar as the value of
the U.S. dollar strengthened relative to these currencies following the
aforementioned news of better-than-expected U.S.


economic
data, as well as in response to a worldwide “flight-to-quality” due to fears of
an intense credit crunch and subsequent concerns of a global recession.
Additional gains of approximately 0.6% were experienced during July and August
from short positions in the Japanese yen versus the U.S. dollar as the value of
the Japanese yen fell relative to the U.S. dollar after Japan's government
downgraded its assessment of the economy to "worsening," indicating that the
six-year expansion of Japan's economy might have ended.











- 28
-





The
Partnership recorded total trading results including interest income totaling
$8,342,733 and expenses totaling $5,355,027, resulting in net income of
$2,987,706 for the nine months ended September 30, 2008.  The
Partnership’s net asset value per Unit increased from $9.84 at December 31, 2007
to $10.09 at September 30, 2008.





The most
significant trading gains of approximately 2.5%, 1.6%, 1.0%, 0.8%, and 0.8%,
respectively, were experienced primarily during January, February, March, and
June, from long positions in the euro, Australian dollar, Chilean peso, Taiwan
dollar, and Mexican peso versus the U.S. dollar as the value of the U.S. dollar
weakened against most of its major rivals after U.S. government reports showed a
rise in unemployment, weaker-than-expected U.S. retail sales, and U.S. consumer
confidence at a 16-year low.  The value of the U.S. dollar continued
to fall after the U.S. Federal Reserve held interest rates steady at 2.0%
despite rising inflation. Further gains were experienced throughout the third
quarter from short positions in the Taiwan dollar and Mexican peso versus the
U.S. dollar as the value of the U.S. dollar strengthened relative to these
currencies following the aforementioned news of better-than-expected U.S.
economic data, as well as in response to a worldwide “flight-to-quality” due to
fears of an intense credit crunch and subsequent concerns of a global
recession.  Additional gains of approximately 1.6% were achieved
primarily during January, March, April, May, August, and September, from short
positions in the Korean won versus the U.S. dollar as the value of the Korean
won fell amid concerns of a rising Current-Account deficit out of
Korea.  A portion of the Partnership’s gains in the first nine months
of the year was offset by losses of approximately 0.5% experienced from short
positions in the British pound versus the U.S. dollar as the value of the
British pound strengthened against the











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U.S.
dollar during January, February, March, and April after retail sales in the
United Kingdom unexpectedly increased and minutes from the Bank of England
indicated significant concerns about rising inflation in the United Kingdom.
Meanwhile, losses of approximately 0.4% were recorded from short positions in
the Japanese yen versus the U.S. dollar as the value of the Japanese yen
strengthened during January after a decline in global equity markets and
weaker-than-expected U.S. economic data caused investors to reduce existing
“carry-trade” positions.  Further losses were incurred from newly
established long positions in the Japanese yen versus the U.S. dollar during
February and April as the value of the Japanese yen reversed lower following
comments from the Bank of Japan that the Japanese economy might be
slowing.  Losses of approximately 0.3% were incurred primarily during
April from short positions in the South African rand versus the U.S. dollar as
the value of the South African rand increased amid stronger-than-expected
economic data out of South Africa. Newly established long positions in the South
African rand versus the U.S. dollar experienced further losses during August as
the value of the U.S. dollar reversed higher relative to the South African rand
following the aforementioned news of better-than-expected U.S. economic data and
amid a worldwide “flight-to-quality”. Lastly, losses of approximately 0.2% and
0.2%, respectively, were recorded from both long and short positions in the
Indian rupee and Hungarian forint versus the U.S. dollar as the value of these
currencies moved without consistent direction throughout a majority of the first
nine months of 2008.























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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 on such contracts 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,
exchange-traded forward, and exchange-traded futures-styled options contracts
are settled daily through variation margin.  Gains and losses on
off-exchange-traded forward currency contracts and forward currency options
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 forward currency contracts in the Partnership accounts with the
counterparty, which is accomplished by daily maintenance of the cash balance in
a custody account held at MS&Co.




















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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 typically to 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 Partnership’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.


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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 re-values 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.




















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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, 2009 and 2008.  At September 30, 2009 and 2008, the
Partnership’s total capitalization was approximately $64 million and $90
million, respectively.




Primary
      Market
            September
      30, 2009
            September
      30, 2008Risk Category
            Value at Risk
            Value at RiskCurrency
            (1.03)%
            (0.73)%





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
on such contracts, the composition of its trading portfolio can change
significantly over any given time period, or even within a single trading
day.  Such change could positively or negatively materially impact
market risk as measured by VaR.





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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, 2008 through
September 30, 2009.





Primary Market Risk
Category
            High
            Low
            AverageCurrency
            (1.03)%
            (0.16)%
            (0.59)%





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 movement.





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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 the
Partnership’s market risk exposure at September 30, 2009 and 2008, and for the
four quarter-end reporting periods from October 1, 2008, through September 30,
2009.  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 their 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.  These balances and any market risk they may represent are
immaterial.





The
Partnership also maintains a substantial portion of its available assets in cash
at MS&Co.; as of September 30, 2009, such amount was equal to approximately
99% of the Partnership’s net asset value.  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.


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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.





The
Trading Advisors,in general, tend
to utilize trading system(s) to take positions when market opportunities
develop, and Demeter anticipates that the Trading Advisors will continue to do
so.





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,
2009.  It may be anticipated, however, that market exposure will vary
materially over time.











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-





Currency.  The
Partnership’s currency market exposure at September 30, 2009, 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,
2009, the Partnership’s major exposures were to the British pound, Japanese yen,
Swiss franc, euro, Australian dollar, Canadian dollar, New Zealand dollar,
Norwegian krone, Swedish krona, Hungarian forint, Polish zloty, and Czech koruna
currency crosses, as well as 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


The
following was the only non-trading risk exposure of the Partnership at September
30, 2009:





Foreign Currency
Balances. The Partnership’s primary foreign currency balances at
September 30, 2009, were in Swiss francs, British pounds, euros, Japanese yen,
Swedish kronor, Mexican pesos, Australian dollars, Hungarian forint, New Zealand
dollars, Canadian dollars, Polish zlotych, Turkish lire, South African rands,
Singapore dollars, Norwegian kroner, Czech koruny, Israeli shekels, Danish
krone, and Hong Kong dollars.  The Partnership controls the
non-trading risk of foreign currency balances by regularly converting them back
into U.S. dollars upon liquidation of their respective positions.








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-





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 market sectors and
trading approaches through the selection of Commodity Trading Advisors and by
daily monitoring their performance.  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


As of the
end of the period covered by this quarterly report, the President and Chief
Financial Officer of Demeter 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.





Changes in Internal Control
over Financial Reporting


There
have been no material changes during the period covered by this quarterly report
in the Partnership’s internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected
or are reasonably likely to affect the Partnership’s internal control over
financial reporting.





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Limitations on the
Effectiveness of Controls


Any
control system, no matter how well designed and operated, can provide reasonable
(not absolute) assurance that its objectives will be
met.  Furthermore, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected.





Item
4T.  CONTROLS AND
PROCEDURES


Not
applicable.






























































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-





PART
II.  OTHER
INFORMATION





Item
      1A.
            RISK
      FACTORS





There
have been no material changes from the risk factors previously referenced in the
Partnership’s Report on Form 10-K for the fiscal year ended December 31,
2008.








Item
      6.
            EXHIBITS





31.01
            Certification
      of President of Demeter Management LLC, the general partner of the
      Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.




31.02
            Certification
      of Chief Financial Officer of Demeter Management LLC, the general partner
      of the Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.




32.01
            Certification
      of President of Demeter Management LLC, 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 LLC, 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.



























































– 41
–



























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 Smith Barney Spectrum Currency L.P.(Registrant)By:
            Demeter
      Management LLC(General
      Partner)November
      13, 2009
            By:
            /s/Christian
      AngstadtChristian
      AngstadtChief
      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.






























































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