Dollar ETF Finds Support From Outperforming Economy

ETF Trends

Despite the country’s slow growth, the U.S. is still outperforming other major economies, bolstering a gauge of the dollar to its highest level in over a month and lifting dollar-related exchange traded funds.

The PowerShares DB U.S. Dollar Index Bullish Fund (UUP) was up 0.2 Friday. The ETF is currently trading at its highest level since February and is up 0.3% year-to-date. [ECB Expectations Bolster Dollar ETFs’ Appeal]

The Bloomberg Dollar Spot Index, which follows the U.S. currency against 10 major counterparts, is in its second weekly gain and touched its highest level since June 18, Bloomberg reports.

“The U.S. dollar continues to be doing a little bit better compared to other currencies,” Sireen Harajli, a strategist at Mizuho Bank Ltd., said in the Bloomberg article. That’s “mainly because despite the slight weakness in U.S. data, it’s still outperforms what’s going on in Europe.”

The greenback is at a eight-month high against the Eurozone currency, Reuters reports. [Diverging Fed, ECB Policies Pressure Euro ETFs]

“U.S. data has been good or better than expected, whereas European data continues to point to a slowdown,” Boris Schlossberg, managing director in FX strategy at BK Asset Management, said in the Reuters article.

Specifically, the dollar is holding its ground as demand for U.S. durable goods rose 0.7% against median forecasts of 0.5%. Additionally, the U.S. economy is expected to expand 1.7% this year, whereas Eurozone countries are estimated to grow 1%.

Additionally, due to the euro bloc’s proximity to the ongoing conflict in Ukraine, there is also a slight volatility concern.

“ There’s some perception that if geopolitical tensions escalate, the euro zone economy would be the most potentially vulnerable economy in the G10, and that hurts the euro,” Vassili Serebriakov, currency strategist at BNP Paribas, said in the Reuters article.

The PowerShares DB U.S. Dollar Index Bullish Fund 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.

Investors can also look at an actively managed option, WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) , which currently tracks the USD against the euro, yen, Canadian dollar, U.K. sterling, Mexican peso, Australia dollar, franc, South Korean won, Chinese yuan and Brazilian real. USDU is down 1.4% year-to-date. [ETFs for the end of ZIRP]

Additionally, for the more aggressive trader, the PowerShares DB 3x Long US Dollar Index Futures ETN (UUPT) provides a leveraged 300% bullish monthly return to the U.S. dollar futures index. UUPT is up 1.0% year-to-date.

PowerShares DB U.S. Dollar Index Bullish Fund

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UUP_ETF

For more information on the USD, visit our U.S. dollar category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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