The U.S. dollar and currency-related exchange traded fund jumped to their highest level since March as traders raised bets that the Federal Reserve could raise interest rates in December on improved U.S. economic data in recent weeks.
The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) gained 0.8% Tuesday and was trading at its highest level since early March. UUP 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.
Meanwhile, the U.S. Dollar Index (DXY), which tracks the USD against a basket of major global currencies, also rose 0.8% to 97.7 mid-Tuesday.
“Recent data on jobs, manufacturing and services growth have shown compelling strength that could green light a U.S. rate hike by the end of the year,” Joe Manimbo, senior market analyst at Western Union Business Solutions, told Reuters.
Investors are waiting for Wednesday’s release of minutes of the latest Federal Reserve monetary policy meeting for any further hints of a December interest rate hike. The Fed funds futures market shows options traders are pricing in a 70% probability the Fed will raise rates in December.
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