In the foreign exchange market, currency traders remain stalwart bulls of the greenback, propping up U.S. dollar exchange traded funds, while growing increasingly bearish on the euro.
The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) has strengthened 8.1% year-to-date. UUP tracks the price movement of the U.S. dollar against a basket of currencies – the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. [Overseas Deflation, Currency Wars to Support USD ETF]
Even with the strong gains over the past few months, currency traders are remain long USD. According to the Commodity Futures Trading Commission, bullish bets on the USD reached a record high of $45.7 billion in the first week of November, reports Chiara Albanese for the Wall Street Journal.
In the ETF space, though, UUP experienced $48.6 million in outflows over the first week of November, according to ETF.com data, which suggests some traders are engaging in the time-honored tradition of profit taking after the ETF touched its highest since 2011. [Winners and Losers of the Dollar’s Recent Ascent]
Nevertheless, in the Forex, the CFTC report reveals positive expectations on the dollar, with all major currencies now short against the U.S. currency – this has happened only one other week since 2000.
Currency traders are particularly bearish on the euro. Euro shorts weigh for about 62% of the total dollar positions at $28.1 billion, the most bearish level since August 2012. Additionally, trading activity is still gaining speed.
“Many currencies saw both the gross short and long positions increase, which suggests that trading is becoming more active,” Camilla Sutton at Scotiabank said in the article.
ETF traders looking to profit from further euro decline have short or bearish options as well, including the ProShares UltraShort Euro (NYSEArca: EUO), the ProShares Short Euro (NYSEArca: EUFX) and the Market Vectors Double Short Euro ETN (NYSEArca: DRR).
EUFX is designed to provide 100% of the inverse, or opposite, return of the U.S. dollar price of the euro, on a daily basis. EUO is the double-leveraged version of EUFX, providing a -2x, or -200%, daily performance of the euro currency. DRR tracks the Double Short Euro Index, which also provides a -200% exposure to the euro. Year-to-date, EUO increased 19.9%, EUO gained 9.7% and DRR rose 22.2%.
PowerShares DB U.S. Dollar Index Bullish Fund
For more information on the Forex, visit our currency ETFs category.