It has been impossible to ignore the U.S. dollar’s rise in 2014. Just ask gold, oil and a broad swath of developed market currencies that have been punished by the greenback’s ascent.
Of course, there have been beneficiaries of King Dollar’s reclamation of royal status, namely the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP). UUP, the U.S. Dollar Index tracking ETF, is up nearly 11% this year. On Tuesday, the ETF rose to its highest levels since September 2010. [Improving Fundamentals Buoy Dollar ETFs]
The WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSEArca: USDU) has also enjoyed the dollar’s rise. By the strictest definition of the term, USDU is not a rookie ETF because the actively managed fund debuted in December 2013. However, given USDU’s debut date it is not a stretch to call the ETF “new” and with that it is not a stretch to say USDU is also one of the most successful new ETFs on the market.
Over $330 million in assets confirm as much. That total would make USDU one of the most successful to come to market this year, if the ETF had done that. It also makes the ETF one of the fastest growing actively managed funds. In fact, only eight ETFs that have launched in 2014 have gained more assets than USDU.
Year-to-date, USDU is up nearly 8% and it appears as though the ETF is poised for more upside in 2015. Due to the improving U.S. economy, the Federal Reserve provided a strong signal that it will hike rates sometime next year but will remain “patient” in deciding when to raise interest rates, Reuters reports.
Meanwhile, other developed economies are enacting looser monetary policies. For instance, the Bank of Japan is implementing policies centered on a weaker yen, and the stubbornly low inflation rate in the Eurozone leaves the European Central Bank more room for stimulus measures. [Dollar ETFs Could do it Again Next Year]
Add to that, Switzerland recently implemented negative deposit rates. USDU allocates about 55% of its weight to the Eurozone, Japan and Switzerland.
USDU’s active management offers investors an advantage, particularly is emerging markets currencies remain weak in 2015. Due to the fact that the ETF is not tied to an index, USDU is able to integrate emerging markets currencies into its fold.
Currently, that includes a 9.2% weight to Mexico and a combined 8.6% weight to South Korea, China and Brazil. That nicely positions USDU to benefit if emerging currencies continue pricing in the possibility of higher U.S. interest rates next year.
WisdomTree Bloomberg U.S. Dollar Bullish Fund
