The U.S. dollar is regaining ground, with the greenback-related exchange traded fund trading back above its long-term trend line, on the recent upbeat economic data.
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 0.8% on Friday. UUP is trading above its 200-day simple moving average and was testing its 50-day line. The dollar ETF is still down 1.5% year-to-date.
The Dollar Index, which covers a basket of developed market currencies, was 0.9% higher on Friday to 98.143.
The USD rose to a three-week high against the euro currency and a one-week high against the Japanese yen while the British pound dipped to its lowest level against the greenback since 2009, reports Min Zeng for the Wall Street Journal.
The U.S. dollar was regaining ground after the government revealed the economy expanded at a better-than-expected 1% rate during last quarter of 2015, compared to previous predictions of 0.7% and economists’ projections of a 0.4% expansion. Additionally, another report revealed increased consumer spending and upbeat business spending numbers.
The stronger U.S. data helped support calls for the Federal Reserve to stick to interest rate normalization, which would diminish the amount of dollars sloshing around and strengthen the U.S. currency.
”It brings the monetary policy divergence theme back into play, which is supportive for the dollar,’’ Paresh Upadhyaya, portfolio manager at Pioneer Investments, told the Wall Street Journal.
The dollar also strengthened against many emerging market currencies. 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 0.8% Friday and was only down 0.9% year-to-date.
The dollar may have also found greater support from foreign investors as many global traders turned to the U.S. Treasuries. More international investors have piled in to the relatively attractive yields in U.S. government debt as foreign central bank policies have pushed international government yields to near zero or negative in some cases like Japan. [Treasury Bond ETFs Continue to Impress]
owerShares DB U.S. Dollar Index Bullish Fund
Max Chen contributed to this article.
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