Up nearly 4% year-to-date, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) is now one of this year’s top currency exchange traded funds. With the greenback residing near multi-year highs, UUP just keeps grinding higher.
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. 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. Importantly, UUP could still offer investors significant upside even after its recent sharp rally.
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. After raising rates for the first time this year earlier in December, the Federal Reserve is targeting as many as three rate hikes in 2017.
“The greenback has been in a pronounced uptrend since August, gaining nearly 10% over that period. The dollar’s march upward has been especially pronounced since last month’s U.S. presidential election, with optimism over the policies President-elect Donald Trump is expected to support sparking a rally that has taken the buck to levels last seen in 2002,” reports MarketWatch.
The dollar has recently been so strong that some currency traders are suggesting the U.S. currency can hit parity with the euro next year.
Euro weakness would benefit the ProShares UltraShort Euro (NYSEArca: EUO). Underscoring the euro’s prominence on the global currency stage and investors’ willingness to bet on weakness for the currency, EUO is one of the largest currency ETFs trading in the U.S. Another idea for euro bears to consider is the VanEck Vectors Double Short Euro ETN (NYSEArca: DRR).
“On Tuesday, which was marked by some of the lightest trading this year, the dollar was supported by data showing U.S. consumer confidence climbed to its highest level in 15 years,” according to MarketWatch.
The dollar is also soaring against other major currencies, including the yen and British pound.
For more information on the USD, visit our U.S. dollar category.