After trending lower since mid-2010, an exchange traded fund indexed to the U.S. dollar’s movements against a basket of foreign currencies is trying to find a bottom and reverse course.

Since late July, PowerShares U.S. Dollar Index Bullish (NYSEArca: UUP) has been making “higher lows” as it tries to recover. Despite a spike in the middle of 2010, the greenback has been weakening in the wake of the credit meltdown due to easy monetary policies and economic stimulus from the Federal Reserve.

However, the dollar ETF is catching a bid with the debt crisis raising questions about the viability of the euro. Yet other currencies such as the Japanese yen and Swiss franc have remained strong against the dollar. [Swiss Franc ETF]

PowerShares U.S. Dollar Index Bullish tracks the dollar against a weighted basket of these currencies: euro, yen, British pound, Canadian dollar, Swedish krona and Swiss franc. [Dollar ETFs In Focus After as U.S. Debt Talks Falter.]

“From a [foreign exchange]perspective, further accommodative policy from The Fed is clearly expected to be a medium term drag on the dollar, but with fears still lingering over the recent equity capitulation, the dollar is likely to be dictated by gyrations in market sentiment,” said currency strategists at Brown Brothers Harriman in a MarketWatch report. [Charting Euro ETFs Next Moves.]

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