From early November through the end of last year, there was plenty of ebullience surrounding the U.S. dollar and the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), but that bloom has quickly come off the dollar’s rose as UUP is off nearly 2.7% to start 2017.
Some currency market observers believe the greenback faces more near-term downside. 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. While many of those currencies were expected to weaken against the U.S. dollar this year, some currency market strategists believe some of the major currencies are oversold against the greenback.
Expectations that the Federal Reserve will boost interest rates multiple times this year are prompting some investors to speculate the dollar has more upside ahead of it. However, the Fed’s February meeting did not result in a rate hike and there is intensifying speculation that President Donald Trump’s policies could spur increased political volatility, making it hard for the Fed to pursue higher borrowing costs.
“Adding to recent woes is the fact U.S. economic data has been generally disappointing. Last Friday’s GDP report missed even the pared down estimates, printing below the key 2% mark at 1.9%. Wage growth and personal spending were also below forecast, indicating that, so far, the jump in consumer sentiment is not translating into greater economic activity,” reports ETF Daily News.
Japan has overtly blasted Trump for saying the country has intentionally devalued the yen, indicating the CurrencyShares Japanese Yen Trust (NYSEArca: FXY) could be poised for a resurgence against the dollar and UUP.
“But if the market perceives any dovish tilt in tone, then USD/JPY could quickly come in for a beating. The pair has not been able to retake the key 115.00 level for days and a failure to do so this week could point to a steeper correction toward the 110.00 figure,” according to ETF Daily News.
For more information on the USD, visit our U.S. dollar category.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.