As Federal Reserve cogitates on tightening its monetary policy, the U.S. dollar, along with related exchange traded funds (ETFs), could become a more attractive currency option.

Recent comments by St. Louis Fed President James Bullard and Philadelphia Fed President Charles Plosser have hinted to an end to loose monetary policy, reports Erin McCarthy for The Wall Street Journal. Mr. Bullard said that the second round of “quantitative easing” could stop short of its original target – the Fed’s $600 billion Treasury purchases will end in June. [Dollar ETF Strengthens As Investors Head For Safety.]

Ron Leven, currency strategist at Morgan Stanley, remarks that “the markets are starting on the margin to rethink the potential for Fed tightening coming sooner rather than later.”

The U.S. dollar has regained some ground against the Japanese yen and Swiss franc this week. Europe’s Central Bank has already decided to raise rates next month, resulting in the recent sideways trading of the dollar against the euro. Analysts note that the markets are betting on more than one ECB rate hike this year. [European ETFs Tread Water After Meeting.]

For more information on the dollar, visit our U.S. dollar category.

  • PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP)

Max Chen 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.

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