The U.S. dollar exchange traded fund has been weakening for much of the year as fiscal problems and accommodative Fed measures weighed on the greenback. Nothing appears to be changing anytime soon.
The PowerShares DB US Dollar Index Bullish Fund (NYSEArca: UUP) was down 3.0% over the past three months and declined 1.7% year-to-date. [Technicals Say Greenback Will See Red]
“There is nothing to suggest that the recent trend of a falling dollar will subside any time soon,” David Fabian, Managing Partner at FMD Capital Management, said. “I am continuing to advocate avoiding this space in favor of more traditional asset classes such as stocks and bonds.”
On Wednesday, the Federal Reserve stated that it will maintain its $85 billion monthly bond purchasing program, citing additional need to support the economy, especially with the growing fiscal problems, Bloomberg reports.
“The recovery in the housing sector slowed somewhat in recent months,” the Federal Open Market Committee said. “Fiscal policy is restraining economic growth.”
Nevertheless, the U.S. dollar is part of a global foreign exchange market, and any weakness overseas could push foreign investors back to the greenback.
“A breakdown in international markets might send investors fleeing to purchase the dollar as a safer alternative to foreign currencies,” Fabian added.