U.S. Dollar ETFs Rally with Greenback Hitting a Two-Decade High | ETF Trends

The U.S. dollar and currency-related exchange traded funds climbed Thursday, with the greenback hitting a fresh two-decade high, after the latest U.S. update reflected a strong economy, fueling bets that the Federal Reserve will maintain its aggressive interest rate hike outlook.

On Thursday, the Invesco DB US Dollar Bullish (UUP) was up 0.9%, and the WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) increased 0.8%.

UUP tracks the price movement of the U.S. dollar against a basket of currencies, including the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc. The actively managed USDU tracks the USD against a broader basket of developed and emerging market currencies, including those from China, India, South Korea, Switzerland, Australia, Mexico, the United Kingdom, Canada, Japan, and Europe.

Meanwhile, the U.S. Dollar Index, which tracks the USD moves against a basket of major peers, rose 0.9% to 109.7.

The dollar index advanced to 109.99 earlier on Thursday, its highest level since June 2022, after a government report revealed the number of Americans filing for unemployment benefits dipped last week amidst strong demand for workers and a tight labor market, Reuters reports.

Additionally, the Institute for Supply Management (ISM) showed U.S. manufacturing expanded in August to rising employment and new orders.

“It comes as no surprise that the dollar hit a fresh record high on both safe-haven flows from global economic weakness and as a resilient U.S. economy paves the way for the Fed to remain aggressive,” Edward Moya, chief market analyst at Oanda, told Reuters.

“King dollar has awoken from a nap, and that could spell a lot more pain for the European currencies,” he added.

Looking ahead, the markets are now waiting on the August U.S. nonfarm payrolls report on Friday, a key data point for Fed officials, who will be meeting later in September.

Due to the strong state of the U.S. economy compared to other parts of the world, many have turned to USD assets and the greenback for its relative safe-haven status.

“Even after hitting fresh records, USD strength has scope to extend somewhat further, boosted by the global slowdown and the European energy crunch in particular,” analysts at Generali Insurance Asset Management told Reuters.

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