The dollar (and this ETF) keeps going up, up, UUP


Oith rising rates reinforcing the strength of the US dollar, its rise has an impact on other currencies. The WSJ Dollar Index rose 8.7% through June, giving it its best first half since 2010. The index was up another 1.4% this month through Thursday.

This rally is not only affecting emerging market currencies, it is also causing developed countries to fall. Last week, the euro hit its weakest level since 2002, falling below parity with the dollar.

The main driver of the dollar’s rise is a hawkish Federal Reserve. In June, the Fed approved a 0.75 basis point rate hike, the largest since 1994. Fed officials signaled they would likely raise rates by the same amount later this month.

“Investors are also drawn to the United States as a source of relative stability amid weak economic conditions overseas,” according to the Wall Street Journal. “When putting money into US stocks and bonds, foreign investors typically use dollars, which boosts the US currency.”

Investors looking for a cost-effective and convenient way to track the value of the US dollar against a basket of major global currencies may want to consider the Invesco DB US Dollar bullish (NYSEArca: UUP). UUP tracks the price of the US dollar against a basket of currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

The UUP is up more than 11% since the start of the year.

While VettaFi’s analyst report noted that this fund may be suitable for investors looking for a fund that is inversely correlated to the broader stock market or those betting on a flight to quality, Invesco noted, however, that UUP “is not suitable for all investors due to the speculative nature of an investment based on the Fund’s trading which takes place in highly volatile markets. Because an investment in futures contracts is volatile, such frequency in the market price movement of the underlying futures contracts could result in significant losses.

UUP has an expense ratio of 0.78%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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