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Is the Uptrend in Dollar ETFs Over?

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On the back of a strongly performing economy and rising rate scenario, the greenback peaked to a 16-month high on Nov 12. However, on Nov 16, the U.S. dollar index saw a slump of 0.5% owing to certain comments from top Fed officials. Greenback fell to a one-week low against euro and a two week low against yen on Nov 16. Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) and WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU - Free Report) closed Nov 16 down 0.7% and 0.6%, respectively (see: all the Currency ETFs here).

The newly appointed Fed vice chairman Richard Clarida sees cooling signs in global growth. Recently, there was widespread panic in the global economic scenario due to the political turbulence in Italy, fluctuations in oil prices, rising rate concerns and uncertainty clouding resolution talks between Washington and Beijing.

Clarida sees short-term borrowing costs of the United States close to the neutral rate range of 2.5-3.5%, which could possibly point to the end of monetary tightening. Benchmark U.S. 10-year Treasury yield has retreated a bit from its recent top of 3.25% (read: Emerging Market ETFs Pop on U.S.-Sino Trade Talks, Rate Hikes).

The Fed has hiked rates multiple times since the year 2015 with three of them coming this year. At the recent FOMC meeting, the central bank reaffirmed its plan to raise interest rates for the fourth time this year next month, with two more hikes expected by mid-2019.

Recently, Federal Reserve Bank of Dallas President Robert Kaplan also indicated a slowdown in growth in China and Europe. China’s GDP growth rate declined to a 10-year low year over year for the recently reported third quarter. Eurozone’s growth, reported at 0.2% for the July-September period, was half the pace of the second quarter.

These developments point toward more downside for the greenback in the period to follow, putting focus on the following ETFs: (read: Fed Meet Signals December Rate Hike: ETFs That Gained).


The fund seeks to track changes, whether positive or negative, in the level of the Deutsche Bank Long USD Currency Portfolio Index - Excess Return plus the interest income from holdings of primarily U.S. Treasury securities and money market income less expenses. The fund has AUM of $540.4 million and an expense ratio of 0.79%. It has returned nearly 0.9% over the past four weeks (as of Nov 16). The fund has a daily traded volume of 1 million shares and carries a Zacks ETF Rank of #3 (Hold) with a Medium risk outlook (read: ETFs to Benefit & Lose From a Strengthening Dollar).


It is an actively managed fund which seeks to provide returns, before expenses that surpass the performance of the Bloomberg Dollar Spot Index. The fund has AUM of $84.7 million and an expense ratio of 0.50%. It has returned nearly 1% over the past four weeks (as of Nov 16). The daily traded volume is nearly 36000.

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