A higher interest rate typically supports the U.S. dollar since the currency becomes more attractive to foreign-seeking investors and diminishes the supply of money sloshing around in the markets.
Related: Are Dollar ETFs Ready to Rally?
Expectations are in place for the dollar to continue rallying against the euro after the European Central Bank revealed it is not considering tapering its quantitative easing program. The euro was a solid performer earlier this year, but recently turned negative on a year-to-date basis.
The U.S. dollar has previously rallied on expectations for a tighter U.S. monetary policy, which would diminish the amount of dollars sloshing around the economy and prop up the greenback against foreign currencies. A Fed rate hike would likely punish the euro.
For more information on the greenback, visit our U.S. dollar category.
PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP)
