Is the Dollar ETF About to Surge? - ETF News And Commentary
March 07 2013 - 8:00AM
Zacks
Most investors have been focused in on stocks so far in 2013,
and for good reason. The S&P 500 and broad U.S. market ETFs
like SPY and VOO have jumped
higher this year by more than 5.7% at time of writing, with many
projecting more gains ahead as well.
However, beyond these solid performances, investors have seen
another winning performance to start 2013, the U.S. dollar. This is
pretty surprising as many times when the dollar is surging, U.S.
stocks are floundering (read Can The Dollar ETF Breakout?).
This has not been the case so far in 2013 though, as investors
have bought up dollars across the board. However, this time it
wasn’t so much a flight to safety, but instead an exodus away from
slumping currencies such as the yen (FXY) and the
pound (FXB).
This has been great news for ETF investors who have purchased
the PowerShares DB US Dollar Index Bullish ETF
(UUP), as it has been a prime beneficiary of this trend,
as it is basically offers up exposure against a basket of world
currencies. These include key European currencies, as well as the
yen and the Canadian dollar.
This basket has done quite poorly against the greenback so far
in 2013, with the euro losing about 1% on the year, and then the
pound and the yen both losing over 7.3% in the same time period.
Since the basket of UUP is roughly 83% in these three
aforementioned currencies (euro, yen, and pound), it is easy to see
why the dollar ETF has been such a strong performer to start the
year (see Japanese Yen ETFs: Any Hope in 2013?).
However, there is also reason to believe that this is just the
beginning of the trend, and that more gains could be ahead for the
dollar ETF in the future. That is because there have been some
favorable trends in the charts, which have only added to some
investors’ bullishness over the dollar ETF in the short term.
As you can see, we have just witnessed a moving average
crossover for the dollar ETF. The short-term measure has now moved
above the longer-term 200 day average, suggesting more bullishness
in the near term if this holds (also read PIMCO Debuts Active
Currency ETF).
This could be especially true if major world currencies like the
yen and the pound continue to have problems, or if Europe has more
political issues. If any of these situations happen, this could
just be the beginning for dollar ETF investors, suggesting that
this fund could be worth a closer look.
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CRYSHS-BRI PD S (FXB): ETF Research Reports
CRYSHS-EURO TR (FXE): ETF Research Reports
CRYSHS-JAP YEN (FXY): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
PWRSH-DB US$ BU (UUP): ETF Research Reports
VANGD-SP5 ETF (VOO): ETF Research Reports
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