The PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) has traded slightly lower over the past month, due in large part to the Federal Reserve declining to raise interest rates following its most recent meeting.
However, UUP and the dollar have modestly regained some momentum over the past two weeks, indicating that has market volatility continues to be an issue, the dollar’s safe-haven status could be reaffirmed.
A lack of inflation is also seen as a potential deterrent to the Fed imminently hiking rates. The diminished inflation expectations has bolstered demand for long-term maturities. The spread between two- and 30-year securities dipped for a fourth day after contracting to as little as 208 basis points Monday, the least since April 28, Bloomberg reports.
Long-term Treasuries have strengthened and yields dipped on the continued decline in oil prices helped push down inflationary pressures. Meanwhile, short-term Treasury yields have been anchored as speculators bet on a slow interest rate hike from the Federal Reserve. [Low Inflation Lifts These ETFs]
The lower inflation makes Treasury bonds more attractive to fixed-income investors as the real yield, or adjusted nominal return to compensate for inflation, has become more attractive.