U.S. Dollar ETF Revels in Being a Safe Haven

The financial crunch in Europe and rising military tensions between North and South Korea have investors spooked. Consequently dollar exchange traded funds (ETFs) are surging as investors look for a safe haven from financial turmoil and the possibility of a war that could destabilize the entire world.

Marc Chandler for iStockAnalyst reports that the U.S. dollar is gaining across the currency board with the exception of the Japanese yen, which is also seen as a relatively safe haven from the worries mentioned above. [5 ETFs to Watch in Topsy-Turvy Markets.]

According to the Associated Press, the euro came within half a penny of the four-year low of $1.2146 set last Wednesday. Year to date, the euro has dropped about 15% while the dollar has gained around  10%.

Over the weekend, Spain’s central bank had to bail out a regional bank, and four other regional banks are looking to combine in an effort against insolvency. In addition, many European countries such as England, Denmark and Italy are announcing austerity measures in an effort to convince creditors that they can pay off their debt. [Euro ETFs Out of the Woods?]

Investors, worried of possible bankruptcies and a halt to global economic recovery as a result of the austerity measures have been buying dollars. For May, the 10-year Treasury yield is down 0.54% to 3.18%. [U.S. Dollar ETF Has Its Moment.]

The dollar is soaring against commodity currencies; that s, currencies of countries that are big commodity exporters. On Tuesday, the dollar hit an eight-month high versus the Canadian dollar at 1.0851, while moving higher against Australian, New Zealand, Scandinavian and Brazilian currencies. [Currency ETFs: Everything You Need to Know.]

For more stories on the dollar, visit our currency ETF category.

• PowerShares DB U.S. Dollar Index Bullish (NYSEArca: UUP)

• CurrencyShares Euro Trust (NYSEArca: FXE)

Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.

Sumin Kim contributed to this article.