Dollar ETFs’ Next Move Heading Into 2010

The U.S. dollar exchange traded funds (ETFs) had their ups and downs this year (mostly downs). But as we look down the barrel of potential interest rate increases and an economic recovery, you may be wondering what’s in store for the greenback in the coming year.

According to Albert Bozzo at CNBC, the worst for the dollar, which has witnessed multi-year bear market, is definitely over and modest gains are expected. Additionally, he suggests that the dollar will likely gain ground against other G7 currencies, but is expected to remain weak compared to the currencies driven by commodity-based economies such as Brazil, Canada and Australia [Why Canada Has Appeal.]

Lastly, the dollar’s relative stability strength compared to other currencies will likely attract investors [More on the dollar.]  The U.S. economy is less likely to be influenced by future credit market shocks when compared to other nations and is likely to feel the least wrath if the commercial real estate market falters.

Although there are plenty of signs indicating the dollar will strengthen, nothing is 100% certain and it is important to have a strategy if you decide to play it. [Our guide to currency ETFs.]

For more on currency ETFs, visit our currency ETF category.

• PowerShares DB U.S. Dollar Index Bullish (NYSEArca: UUP): down 6.7% year-to-date

• PowerShares DB U.S. Dollar Index Bearish (NYSEArca: UDN): up 5.3% year-to-date