The Federal Open Market Committee (FOMC) meets today and that could result in more pain for the already downtrodden U.S. dollar and related ETFs, such as the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), the tracking exchange traded fund for the U.S. Dollar Index.
Investors will wait for comments from the Fed later today for clues about the future of interest-rate policy.
UUP is one of this year’s worst-performing major currency ETFs. 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. Other currencies, including the Australian dollar, yen and Canadian dollar have recently been gaining momentum against the greenback.
“The most important feature of the meeting will not be so much how the Federal Reserve plans to unwind its massive balance sheet, as that is widely expected from the Federal Open Market Committee, but the guidance Fed Chair Janet Yellen and the central bank can give about its plan for the federal funds rate,” reports CNBC.
Related: Too Much of a Good Thing With Dollar ETF Trade
Although the dollar and UUP have struggled against the backdrop of two interest rate hikes by the Federal Reserve, some currency market observers see potential for the greenback to rally in the second half of 2017. The rising euro has also been a problem for the dollar, but some market observers believe the common currency is set to pullback.
“The greenback on Monday hit its highest level against the Japanese yen since late July as yields on U.S. Treasury notes rose modestly, giving the relative value of the dollar a boost,” according to CNBC. “Though the greenback saw a bounce last week, the move higher didn’t last long, and the dollar index has now logged a 10 percent decline since January. The dollar is just barely positive in a week’s time.”
While the probability of the Fed raising interest rates in December has recently increased, investors have added just $47.2 million to UUP over the past 90 days. The ETF has lost almost $188 million in assets this year.
For more information on the USD, visit our U.S. dollar category.