ETF Spotlight on PowerShares DB US Dollar Index Bullish (NYSEArca: UUP) and PowerShares DB US Dollar Index Bearish (NYSEArca: UDN), part of a weekly series.

Assets: UUP has $215 million in assets; UDN has $283 million in assets

Objective: UUP is designed to replicate the performance of being long on the U.S. dollar against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc. It tracks the DB Long USD Futures Index. UDN is designed to replicate being short the performance of the U.S. dollar against the same currencies.

What’s Good

  • UUP and UDN are an easy way to play the movements of the dollar based on your sentiment. Feeling bearish? Try UDN. Bulls could find UUP appealing.
  • Buying currencies can be tricky, time-consuming and expensive. The venture is greatly simplified with these two ETFs.

The Latest News

  • For the first time in 16 years, the U.S. dollar is cheaper to borrow than the Japanese yen. This is bad news for the U.S. dollar, as it has  long benefited from positive yield premiums.
  • It also means that investors are less likely to put their capital into dollar assets. It’s more bad news for the dollar, because it’s already being weakened by the massive amounts of money the government has been printing.
  • The dollar’s cheapness has sent one positive signal, though: fear in the credit markets has eased a great deal. The Libor (London interbank offered rate) has declined sharply.
  • The dollar has been weakening lately, which has sent oil and gold prices higher, since they’re priced in U.S. dollars.
  • On the other hand, it could be a boon for tourism. Foreigners with stronger currency could find the United States a good deal.

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.

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