Foreign investors anticipating dollar depreciation are less willing to hold U.S. bonds because the coupon payments will convert to less of their home currency.

Question

Quizplus · Accepted Answer

When foreign investors expect the dollar to depreciate, the value of the coupon payments they receive from U.S. bonds (which are paid in dollars) will decrease when converted back to their home currency, making U.S. bonds less attractive.

Foreign Investors Anticipating Dollar Depreciation Are Less Willing to Hold