Even amid calls for the common currency to pullback, the CurrencyShares Euro Currency Trust (NYSEArca: FXE), which tracks the euro’s price movements against the dollar, continues defying skeptics. FXE has traded modestly higher over the past week and is clinging to a 12% year-to-date gain, making it one of this year’s best-performing currency ETFs.

Part of the euro’s bull thesis is tied to the surprisingly weak dollar, which has struggled even against the backdrop of two interest hikes this year by the Federal Reserve.

The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), the tracking ETF for the U.S. Dollar Index, is getting hammered this year. 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 euro rally is sustainable even amid the latest flare up of European political uncertainty,” reports ZeroHedge. “A buoyant macro-economic environment partially explains the resilience, but most credit should go to the backstop offered by the ECB.”

Germany and France, which account for half of Euro area GDP, is expected to surprise on the upside as growth picks up speed. Moreover, the lessening political risk in Europe, leading indicators like purchasing manager index, demand for loans and sentiment surveys all suggest that the market continues to improve.

Investors who believe the euro currency could weaken after its recent rally and are bullish on the Eurozone’s outlook can turn to currency-hedged ETF options, such as the the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ). These currency-hedged Europe ETFs may outperform non-hedged Europe funds if the euro depreciates against the U.S. dollar.

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