Once the Fed implements tighter monetary policies, the U.S. dollar will strengthen on the tighter supplies. Meanwhile, overseas central banks are loosening their monetary policies, or increasing the supply of their domestic currencies, which would help depreciate their currencies against the dollar.
Jens Nordvig, global head of G-10 currency strategy at Nomura, anticipates the August through October period will be crucial to the U.S. dollar since the Fed will likely hint at a shift in policies ahead. Alan Ruskin, head of G-10 currency strategy at Deutsche Bank believes the dollar is in a moderate bull cycle and could push 5% higher against other major currencies over the next 12 months.
The more aggressive trader can utilize a geared fund product to gain a leveraged-long position in U.S. dollar moves. The PowerShares DB 3x Long US Dollar Index Futures ETN (NYSEArca: UUPT) provides a leveraged 300% bullish monthly return to the U.S. dollar futures index. UUPT is up 2.3% year-to-date.
PowerShares DB U.S. Dollar Index Bullish Fund
For more information on the greenback, visit our U.S. dollar category.
Max Chen contributed to this article.