The U.S. Dollar Index was down slightly Monday morning on news the negotiations in Washington to raise the U.S. debt ceiling have apparently stalled as leaders were unable to strike a deal over the weekend.
Also Monday, investors weighed headlines that Moody’s cut its rating on Greek debt further into junk territory.
PowerShares DB US Dollar Index Bullish (NYSEArca: UUP) was set to follow its benchmark lower. The exchange traded fund follows the movement of the greenback against a basket of currencies.
In precious metals, SPDR Gold Shares (NYSEArca: GLD) added about 1% as gold climbed to a fresh record on the global debt jitters. Markets are worried a failure to raise the U.S. limit by Aug. 2 could trigger some type of default on government debt.
“The fact that they seem to be jumping from one type of proposal to another and not converging on anything is beginning to worry markets,” said Steven Englander, a currency strategist at Citigroup.
Investors have been seeking other safe havens outside the dollar, such as gold, silver and the Swiss franc, which is near a record high versus the U.S. dollar.
“U.S. dollar down, Swiss franc higher is the most obvious trade on the back of disappointment,”said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second largest lender. “A half-baked answer would probably also be disappointing to the markets. They’re looking for a solution that’s not just short-term, but something long-term and that’s what the ratings agencies have said they want.”
White House officials and Republican leaders are reassuring the public and global markets that the U.S. will avoid a default. However, there is still no deal on the table to raise the $14.3 trillion debt ceiling. [Charting Euro ETFs Next Moves.]
The Dollar Index reached a low of 73.889 on July 21, the lowest since June 9, reports the San Francisco Chronicle.
PowerShares DB US Dollar Index Bullish can give investors exposure to any upward movements in the greenback against six major currencies: the euro, British pound, Japanese yen, Canadian dollar , Swedish krona and the Swiss franc. UUP is in negative territory for the year. [Dollar ETF Could be ‘Tell’ for Commodities Stocks.]
On the flip side, the PowerShares DB US Dollar Index Bearish (NYSEArca: UDN) has gained more than 10%. The fund plays the short side of the U.S. dollar against a basket of the same currencies in UUP.
PowerShares DB US Dollar Index Bullish
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.