A rising dollar also makes already hot U.S. government debt more attractive to investors, particularly those outside the U.S.
“In addition, the perception that the dollar will rise could make it even more attractive for foreign investors to own U.S. bonds, as the currency would be another source of investment returns in such an environment,” according to CNBC.
More international investors have piled in to the relatively attractive yields in U.S. government debt as foreign central bank policies have pushed international government yields to near zero or negative in some cases like Japan.
“Stifel Nicolaus portfolio manager Chad Morganlander believes that now is the time to buy long-dated U.S. Treasury bonds, especially in light of rising yields and global demand. Bond prices dove last week after the Fed’s release of its April meeting minutes, driving up yields for their largest weekly gain since November. Prices and yields move inversely,” adds CNBC.
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PowerShares DB U.S. Dollar Index Bullish Fund