Currency ETFs: Dollar Support Rally Would Hurt Stocks, Commodities

August 28th at 12:56pm by John Spence

PowerShares DB US Dollar Index Bullish Fund (NYSEArca: UUP) is testing a key support line and a rally in the greenback would likely put pressure on stock and commodity ETFs.

Technical analysts watch the dollar ETF because it usually has an inverse correlation with riskier assets.

When the dollar rises, it typically means investors are seeking safe havens and moving away from equities and commodities. A stronger dollar also hurts gold and silver ETFs.

UUP is an ETF designed to measure the performance of the U.S. dollar versus a basket of currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

The dollar ETF has traded lower the past month, while CurrencyShares Euro Trust (NYSEArca: FXE) has been rising on easing concerns over the Eurozone debt crisis. Equity bulls would like to see more strength in the euro and a weaker dollar. [Euro ETF in Developing Uptrend]

PowerShares DB US Dollar Index Bullish Fund

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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