Junk Bond Crash, Fed Anxiety Trigger Dollar Selloff
SputnikNews.com
15.12.2015
The US dollar retreated ahead of the Fed as investors and traders took profits and closed their currency positions in favor of spurring high-yield bonds.
Kristian Rouz – An unfortunate combination of a yet another decline in oil prices, a subsequent Third Avenue demise and nervousness of the upcoming Fed policy meeting provoked a weakening in the US dollar FX rate to its seven-week lowest on Tuesday.
Investors are increasingly insecure of the gloomy outlook for the US energy sector, while a high-yield fixed-income crash threatening to spread to the entire US bond market impaired the reputation of the US-based assets as a safe haven.
Meanwhile, the US Federal Reserve, although widely expected to lift borrowing costs off near-zero, is still likely to deliver a dovish message along with their policy decision, holding back further appreciation of US assets.
Now might be the right time to sell some of the hottest US assets at their peak price, unless the junk bond sell-off wears out.
International investors have also become bearish of the euro, even though the European Central Bank hinted at potentially tighter monetary conditions amidst the accelerating growth by having abstained from loosening its policies in early December.
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