The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), which tracks the price movement of the U.S. dollar against a basket of currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, has climbed nearly 18% over the past two years, making the Dollar Index tracking ETF one of the best-performing currency ETFs over that period.
UUP’s stellar performance over that stretch could be seen as a sign the greenback’s upside from here is limited. However, the dollar’s current bull market still is not five years old and knowing that dollar bull markets can last for eight or nine years means UUP could have another year or two of upside ahead of it. In fact, the dollar could rally for another two years.
“That’s the bullish forecast offered by Alan Ruskin and George Saravelos, macro strategists at Deutsche Bank, who suggest the bull market in the buck still has some way to run before it reaches its next cyclical peak,” reports Business Insider.
However, market participants are displaying some mixed emotions about the greenback’s prospects following the most recent Federal Reserve meeting. The tighter monetary policy would diminish the supply of U.S. dollars floating around in the economy and help the greenback appreciate against foreign currencies. [Dollar ETFs Could Soar Well After Fed Liftoff]
However, even the implication that the Fed’s next rate hike after this week could be several months off could be enough to dampen near-term enthusiasm for the dollar and ETFs like UUP. Some market observers recently noted the dollar should rise against the euro next year, but that the common currenc’s losses against its U.S. rival will not be nearly as severe in 2016 as was seen this year.
“Using history as a guide, Ruskin and Saravelos suggest that in real terms against a basket of currencies, the US dollar has tended to fully recover prior declines, with rallies traditionally occurring over a shorter period than the weakening cycles they have followed. Based on past relationships, it suggests that the bull market in the US dollar will probably run for a further two years and result in gains of at least 10% based on their analysis,” according to Business Insider.
PowerShares DB U.S. Dollar Index Bullish Fund
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.