Banking on the Buck

This morning we have a rare occasion (at least thus far), to talk about a rising U.S. dollar, as the currency has been on a steep losing streak for nearly all of February.

Volume picked up significantly in UUP (PowerShares DB U.S. Dollar Index Bullish, Expense Ratio 0.50%) earlier this month and the fund soon after sharply gapped below its 50 day MA on a severe weakening in the U.S. Dollar relative to other global currencies.

UUP itself tracks the Deutsche Bank Long U.S. Dollar Index (USDX) Futures Index, which invests in USDX futures contracts. Due to the way USDX futures contracts were designed and detailed, a long position in USDX futures is basically a way to be long the U.S. Dollar versus a basket of global currencies including the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and Swiss Franc.

Year to date, despite poor price performance, UUP has still net reeled in more than $69 million in new assets via creation, bringing its asset base up to about $735 million.

UUP remains the largest Currency focused ETP in the U.S. marketplace in terms of asset size, dwarfing the next closest competitor which is FXA (CurrencyShares Australian Dollar Trust, Expense Ratio 0.40%), which has about $324 million in AUM. UUP has been popular with globally focused ETF portfolio managers particularly for its options liquidity as well, as we will often see directional plays enacted in the options in good institutional size, at least on a quarterly basis in the marketplace if not more often than that dependent on global currency conditions and price trends.

For Dollar “Bears”, PowerShares also offers UDN (PowerShares DB U.S. Dollar Bearish Fund, Expense Ratio 0.50%) which is considerably smaller than its sister ETF UUP, with only $59.6 million in AUM at the moment.