With some help from the speculation about the Federal Reserve possibly raising interest rates in December, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) is higher by nearly 2.3% over the past month.
However, that rally could already be running out of steam. 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, has been vexing investors for most of this year, but the widely followed currency could finally be poised to deliver a lengthy bull run if the Fed cooperates.
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The Fed funds futures market shows options traders are pricing in a 70% probability the Fed will raise rates in December. Analysts also argued that the USD has benefited from Democratic presidential nominee Hillary Clinton’s widening lead in opinion polls over rival, Republican candidate Donald Trump.
The recent rally in the value of the U.S. Dollar vs. a basket of major currencies, which arguably started in early May, is beginning to wane as traders begin to close out Dollar positions as the U.S. Presidential Election nears,” reports Options Express. “As recent polls suggest a close race between Democratic nominee Hillary Clinton and Republican nominee Donald Trump with less than a week to until the election, the uncertainty as to who the next U.S. President will be has skittish traders exiting long Dollar positions, with is giving support to both the Euro and to a lesser extent the Japanese Yen the past few trading sessions.”[related_stories]
Further supporting the U.S. dollar rally, the British pound has plunged to three-decade lows on fears of a so-called hard Brexit after U.K. Prime Minister told the Conservative party conference that Britain would trigger Article 50 – the official legal notification that would begin the exit negotiations with the European Union – “no later than the end of March.”
Looking at the daily chart for the December Dollar Index futures, we notice the index briefly trading above the 99.000 level before aggressive selling emerged which send the December futures down 1.300 points from the recent highs,” notes Options Express.
For more information on the greenback, visit our U.S. dollar category.
PowerShares DB U.S. Dollar Index Bullish Fund