Can we expect Dollar Index sellers into year end?
A bearish FOMC has caused the Dollar Index to sell off. However, there are also very important seasonal factors at work in the Dollar as we approach year end. The Dollar is sold partly due to taxation issues. At year end US companies send USD out of parent companies to daughter companies. This results in USD outflows.
Over the last 50 years, between December 22 and Jan 01 the Dollar Index has lost value 36 times. The largest loss was -3.10% in 1977. Will there be losses again this year? If so, expect sellers on the rallies.
Trade Risks: The main risk to this trade is if there is strong risk off trading heading into year end on the US stimulus bill not being passed. This should result in USD strength on risk off flows.