As the housing sector appears to be rebounding and encouraging news continues to emerge from the industry, some wonder if the rebound is necessarily a great thing for dollar-related exchange traded funds (ETFs).
There are three reasons why the dollar may weaken as positive economic indicators, such as a rebound in real estate, continue to come in, states Chris Gaffney of FX University Daily.
- First, UBS, the world’s second-largest currency trader, predicts that the dollar will weaken as the global economy starts to rebound and investors around the globe begin to take on more risk.
- Second, the United States is gearing up to try to sell $325 billion in Treasuries, and the vast majority of the bonds will be short-term.
- Last, Chinese consumers are driving the growth of their own nation and China is becoming less dependent on the U.S. consumer for growth. Once the economy starts rebounding, demand for products from the West will also increase. Low inventories could drive prices up.
Regardless of which way the U.S. dollar goes, the following ETFs will be influenced:
- PowerShares DB USD Index Bullish (UUP): down 4.2% year-to-date
- PowerShares DB USD Index Bearish (UDN): up 3.1% year-to-date
For more stories on the U.S. Dollar, visit our currency ETFs category.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.