U.S. dollar-related ETFs have been on a winning streak, with the greenback hitting a four-month high against the euro, as safe-haven demand and a more bullish outlook on the U.S. economy helped lift the USD.
Year-to-date, the Invesco DB US Dollar Bullish (NYSEArca: UUP) increased 2.8%, and the WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSEArca: USDU) rose 2.3%. Meanwhile, the Dollar Index (DXY), which tracks the greenback against a basket of its peers, hit its highest level since October 2019.
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. The actively managed USDU tracks the USD against a broader basket of developed and emerging market currencies, including China, India, South Korea, Switzerland, Australia, Mexico, United Kingdom, Canada, Japan, and Europe.
Investor fear over the spreading coronavirus in China, which has claimed over 900 lives so far, and the potential negative global economic impact has driven increased demand for safe-haven assets.
Meanwhile, in the United States, relatively strong economic data, with a recent jobs report revealing the U.S. employment accelerated in January, has further strengthened the attractiveness of U.S. assets.
In comparison, other areas of the globe is already slowing down. For example, German industrial output recorded its biggest dip in December since the recession-hit year of 2009, Reuters reports. Data also revealed that Italian industrial output was much lower than expected in December.
“We had much stronger-than-expected U.S. data, coupled with much weaker-than-expected eurozone data,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Reuters. At the same time, “we have the safe-haven bid from the coronavirus. That is killing EM and really benefiting the dollar, and to a lesser extent the yen and Swiss.”
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