Dollar ETF Could Continue Struggling
This article was originally published on ETFTrends.com.
Even with a pop in early February, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) is down 2% year-to-date and some currency market analysts and observers believe pressure will remain on the greenback for the remainder of 2018.
UUP tracks movements against a basket of currencies including euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. UUP tracks the Deutsche Bank Long USD Currency Portfolio Index – Excess Return Index.
“We expect the US dollar to continue to depreciate due to ongoing global economic growth and converging central bank policies,” said Invesco in a recent note. “We have revised our 2018 US Federal Reserve rate hike call from two to three, in line with US bond pricing. While recent inflation strength has raised the possibility of four rate hikes, we believe that is unlikely without significant wage pressures.”
UUP’s slack performance since early 2017 indicates shorting the dollar has been the right way to play the U.S. currency. The dollar slumped last year even as the Federal Reserve raised interest rates three times and the currency is tumbling against this year even amid expectations calling for another round of rate hikes.
Traders considering a bearish position on the dollar can consider the PowerShares DB US Dollar Index Bearish (NYSEArca: UDN), an inverse though not leveraged bet against the greenback.
For more information on the USD, visit our U.S. dollar category.
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