As the U.S. economy expands while Japan and the Eurozone stumble, traders are pushing up the U.S. dollar, along with related exchange traded funds, and dumping the euro and yen currencies.
The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), which tracks the price movement of the U.S. dollar against a basket of currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, gained 0.4% Tuesday. Over the past three months, UUP has increased 6.8%. [U.S. Dollar ETF Pushes Past 10th Week of Gains]
The actively managed WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSEArca: USDU), which tracks the USD against a broader basket of developed and emerging market currencies, was up 0.3% Tuesday and gained 5.9% over the past three months.
Meanwhile, for the more aggressive trader, the PowerShares DB 3x Long US Dollar Index Futures ETN (NYSEArca: UUPT), which provides a leveraged 300% bullish monthly return to the U.S. dollar futures index, jumped 3.7% Tuesday and returned 19.0% over the past three months.
Since July, the yen has depreciated 8% against the greenback to a six-year low and the euro has dipped 7% to a near two-year low as traders anticipate that a strengthening U.S. economy will force the Federal Reserve to hike rates, which would bolster the value of the dollar, reports Ira Iosebashvili for the Wall Street Journal.
Additionally, currency traders are hedging against European Central Bank and Bank of Japan loose monetary policies while the foreign central banks try to stimulate their weak economies.
“After many months, we are finally seeing the dollar diverge with the euro and yen, thanks to the different monetary policies at central banks,” Peter Gorra, head of foreign exchange at BNP Paribas, said in the article.