Why Energy Trust Investors Should Follow the Dollar

• By the tickerspy.com Staff
• On 12:00 pm EDT, Friday October 9, 2009

Oil's recent rally has helped energy trust investors net big gains, but movements in the dollar could jerk the tape.

Over the last week, oil prices have surged from lows below $68.50 to above the $72.50 mark as investors moved away from the falling dollar and the initial jobless claims figure hit a nine-month low. However, today's remarks from Federal Reserve chairman Ben Bernanke caused a rare uptick for the U.S. currency. According to coverage by Bloomberg, Bernanke said monetary may be tightened once the economic outlook has "improved sufficiently," a prospect that could boost the dollar and weigh on commodity prices.

Peter Beutel, president of Cameron Hanover in New Canaan, Connecticut, told Bloomberg, "Oil traders seem to have been taking profits on long positions," noting the dollar's proximity to fresh 52-week lows.

Components of the Canadian Energy Trusts Index have enjoyed oil's recent rally, adding as much as 13% over the last week.

Advantage Oil & Gas (NYSE: AAV - News) and Baytex Entegy Trust (NYSE: BTE - News) are both holding onto double-digit gains in the last five sessions. Meanwhile, Harvest Energy Trust (NYSE: HTE - News), Pengrowth Energy Trust (NYSE: PGH - News), and Precision Drilling Trust (NYSE: PDS - News) have tacked on 7.5% or more for the period.

Even the sector's worst weekly performers, Enterra Energy Trust (NYSE: ENT - News) and Penn West Energy Trust (NYSE: PWE - News) are in positive territory.

A positive outlook for the economy should bring strength to both the dollar and oil in the long run, but for the short term, it could get choppy as traders place bets on the fastest horse.

The PowerShares DB US Dollar Index Bullish (NYSE: UUP - News) and CurrencyShares Canadian Dollar Trust (NYSE: FCX - News) ETFs are today's only winners in the Currency ETFs Index. If the trend continues, some traders might move away from commodities and back into the currencies.

As of this writing, the Canadian Energy Trusts Index is one of the top-35 performing tickerspy Indexes this week, up by 8%.

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