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The latest BRICS summit in Kazan, Russia has intensified discussions around de-dollarization, potentially impacting several major currency-focused exchange-traded funds and raising concerns among U.S. investors about the dollar&#8217;s long-term <a href="https://www.benzinga.com/news/23/09/34269752/jp-morgan-warns-de-dollarization-can-make-us-lose-key-economic-crisis-tool">dominance in global trade</a>.
What Happened: Russian President Vladimir Putin&#8216;s push for an alternative international payments system at the expanded BRICS summit has put dollar-denominated <a href="https://www.benzinga.com/markets/cryptocurrency/24/08/40293239/new-world-currency-not-so-fast-brics-nations-analyst-says-de-dollarization-is-a-myth">assets under renewed scrutiny</a>. 
Notable ETFs that could face pressure include the Invesco DB US Dollar Index Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) and the WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USDU#NYSE">USDU</a>).
&#8220;The dollar is being used as a weapon. We really see that this is so. I think that this is a big mistake by those who do this,&#8221; Putin stated at the summit, highlighting that nearly 95% of Russia-China trade is now conducted in rubles and yuan, <a href="https://www.theguardian.com/world/2024/oct/23/putin-world-economy-bloc-brics-summit">reported</a> The Guardian.
Market analysts suggest that while immediate impacts may be limited, the long-term implications for dollar-based investments deserve attention. The Invesco DB USD Index Bearish ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>) has seen increased trading volume as investors hedge against potential currency risks.
See Also: <a href="https://www.benzinga.com/news/24/10/41509995/kamala-harris-economic-policies-more-robust-more-sustainable-says-nobel-winning-economist-daren-acem">Kamala Harris&#8217; Economic Policies &#8216;More Robust, More Sustainable,&#8217; Says Nobel Winning Economist Daren Acemoglu As He Is Endorses Vice President With 22 Others</a>
However, currency experts emphasize the dollar&#8217;s entrenched position. According to Agathe Demarais, a sanctions specialist at the European Council of Foreign Relations, &#8220;More than 80% of global trade transactions are invoiced in U.S. dollars, which also accounts for nearly 60% of central banks reserves.&#8221;
Why It Matters:&nbsp;The summit&#8217;s outcomes suggest limited immediate progress on alternative payment systems, despite Russia&#8217;s efforts to bypass the SWIFT network. Brazil and India&#8217;s resistance to anti-Western positioning within BRICS indicates that wholesale changes to the global financial system face significant hurdles.
The expanded BRICS bloc, now including 12 new members such as Turkey, Indonesia, and Nigeria, represents a growing challenge to dollar hegemony. However, market fundamentals suggest any transition away from the dollar would be gradual rather than immediate.
Read Next: 
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<li><a href="https://www.benzinga.com/markets/cryptocurrency/24/10/41507397/bitcoin-ethereum-dogecoin-sink-amid-stocks-decline-treasury-yields-climb-analyst-sees-prom">Bitcoin, Ethereum, Dogecoin Sink Amid Stocks Decline, Treasury Yields Climb: Analyst Sees &#8216;Promising Signs&#8217; — Retest &#8216;Successful&#8217; If King Crypto Stays Above This Level</a></li>
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Disclaimer:&nbsp;This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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BRICS Summit 2024: Russian President Calls For De-Dollarization, Here's How It Could Impact US Investors

In a world where the U.S. dollar reigns supreme, its strength isn&#8217;t just a statistic; it&#8217;s a game-changer for investors eyeing currencies like the Canadian dollar, Mexican peso, Chinese yuan, Swiss franc, Brazilian real, <a href="https://www.benzinga.com/markets/forex">and Indian rupee</a>.
<h2 class="wp-block-heading">JPMorgan&#8217;s Chief Strategist</h2>
David Kelly, Chief Global Strategist at JPMorgan Asset Management, highlights that the dollar&#8217;s robust position is fueled by strong economic fundamentals, and with rising interest rates, it's become a magnet for global capital flows.
Kelly emphasizes that the dynamics of global trade are intricately linked to currency values, with the dollar serving as a critical barometer. As trade relationships shift and countries grapple with inflationary pressures, currencies like the Canadian dollar and Mexican peso are under heightened scrutiny. 
Kelly believes that the dollar's strength will continue to exert pressure on trade balances, influencing monetary policies and potentially widening the gap between economies. 
This backdrop sets the stage for investors to not only assess the health of individual currencies but also to navigate the complex interplay between trade, currency fluctuations, and investment opportunities.
Read Also: <a href="https://www.benzinga.com/markets/asia/24/10/41223469/china-rallies-to-2-year-high-europe-slips-dollar-softens-global-markets-today-while-us-slept">China Rallies To 2-Year High, Europe Slips &#8211; Global Markets Today While US Slept</a>
<h2 class="wp-block-heading">Canada, Mexico: A Tough Neighborhood</h2>
Kelly notes that a robust U.S. dollar can often spell trouble for countries reliant on exports. Take Canada and Mexico, for instance—when the dollar flexes its muscles, their currencies struggle to compete. 
For U.S. investors, this creates opportunities to hedge with the Invesco CurrencyShares Canadian Dollar Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXC#NYSE">FXC</a>) or tap into the Mexican peso's volatility through emerging market-focused ETFs.
<h2 class="wp-block-heading">The Yuan: A Game Of Tug-of-War</h2>
But it's not just North America feeling the pinch. The value of the Chinese yuan is under constant scrutiny, especially with China&#8217;s economic policy shifts.
For those looking to diversify, the WisdomTree Emerging Currency Strategy Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CEW#NYSE">CEW</a>) is a savvy way to gain exposure to the yuan while balancing risks associated with other emerging currencies.
<h2 class="wp-block-heading">Switzerland: The Safe Haven Strategy</h2>
The Swiss franc, often dubbed a safe haven, thrives during market turbulence, making it an attractive option for risk-averse investors, according to Kelly. 
With the Invesco CurrencyShares Swiss Franc Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXF#NYSE">FXF</a>), investors can profit from the franc's resilience.
<h2 class="wp-block-heading">Brazil, India: Emerging Markets Under Pressure</h2>
Meanwhile, the Brazilian real and Indian rupee may feel the heat from a strong dollar, impacting their trade balances. 
Investors can navigate these waters with the iShares Currency Hedged MSCI Emerging Markets ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HEEM#NYSE">HEEM</a>), providing a cushion against currency fluctuations.
<h2 class="wp-block-heading">Dollar Bulls &amp; Bears: Play Your Hand</h2>
For those betting on a stronger dollar, the Invesco DB US Dollar Index Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) and the WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USDU#NYSE">USDU</a>) are solid choices. 
Conversely, if you expect a dip, consider the Invesco DB US Dollar Index Bearish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>).
<h2 class="wp-block-heading">The Currency Chessboard</h2>
As Kelly reminds us, the currency landscape is complex but ripe with opportunity. Smart investors will keep a keen eye on these trends to make informed decisions in an ever-evolving market. So, whether you&#8217;re rooting for the dollar or watching its rivals, the game is on!
Read Next: 
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<li><a href="https://www.benzinga.com/markets/forex/24/10/41189631/elliott-waves-dollar-can-recover-as-10-year-us-yields-eyeing-3-9-4">Elliott Waves: Dollar Can Recover As 10 Year US Yields Eyeing 3.9-4%</a></li>
</ul>
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Dollar Domination: JPMorgan Strategist On How The Greenback Shapes Fate Of Franc, Yuan, Rupee

In the investment world, the idea of the U.S. dollar losing its grip on global finance has sparked much debate. However, Joyce Chang, chair of global research at JPMorgan, argues that the dollar&#8217;s dominance remains deeply entrenched, despite growing diversification trends and <a href="https://www.benzinga.com/markets/forex">alternative financial systems</a>.
&#8220;Meaningful erosion of dollar dominance is likely to take decades,&#8221; she said.
<h2 class="wp-block-heading">De-Dollarization Risks Are Exaggerated</h2>
According to Chang, &#8220;de-dollarization in China appears exaggerated.&#8221; 
The dollar continues to be the cornerstone of global finance, she says. It is supported by factors such as deep and liquid capital markets, a strong rule of law, and a commitment to a free-floating exchange regime. These structural elements underpin the dollar&#8217;s role as the world&#8217;s primary currency, ensuring its continued dominance.
While the dollar&#8217;s position is secure for now, Chang highlights significant shifts in cross-border transactions. Sanctions against Russia and China&#8217;s push to bolster the RMB are driving greater diversification away from the dollar, particularly in commodity markets. These changes are reshaping global trade and financial systems, even as the dollar remains the most widely used currency.
Read Also: <a href="https://www.benzinga.com/markets/equities/24/08/40652826/dollar-surges-as-doubts-over-aggressive-rate-cuts-grow-wall-street-climbs-on-consumer-strength-7">Dollar Surges As Doubts Over Aggressive Rate Cuts Grow, Wall Street Climbs On Consumer Strength: 7 ETFs React To Fed&#8217;s Inflation Data</a>
<h2 class="wp-block-heading">Payments Autonomy: The Underappreciated Risk To Dollar Hegemony</h2>
Chang points out that &#8220;the drive for payments autonomy, fueled by technology, is perhaps the most underappreciated risk to USD hegemony.&#8221; 
The emergence of digital payment systems and alternative financial architectures is rapidly transforming domestic finance. 
Local banks and regulators are increasingly seeking to control governance, leading to the development of domestic schemes for digital payments through overseas networks.
While these developments may seem peripheral, they represent a growing trend that could gradually erode the dollar&#8217;s dominance over time. Chang emphasizes that this transformation, fueled by the desire for greater control and independence from the dollar, is an underappreciated risk that investors should closely monitor.
<h2 class="wp-block-heading">Investment Takeaway</h2>
Investors should remain aware of the dollar&#8217;s enduring strength but also pay close attention to the emerging trends that could influence global financial systems in the long run. 
The diversification away from the dollar, particularly in commodity markets, and the rise of alternative payment systems are key themes to watch. While the dollar&#8217;s demise may be exaggerated, the evolving landscape of global finance requires careful navigation.
Actionable Insight: Investors in the Invesco DB US Dollar Index Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), the WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USDU#NYSE">USDU</a>) and the Invesco DB US Dollar Index Bearish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>) should specially pay heed to these insights.
Investors may want to stay diversified in their currency exposure and monitor the developments in alternative financial systems, as these shifts could impact long-term investment strategies.
Read Next: 
<ul>
<li><a href="https://www.benzinga.com/markets/asia/24/09/40683460/asia-markets-mixed-europe-slides-dollar-near-2-week-high-and-gold-steady-above-2-500-global-markets">Asia Markets Mixed, Europe Slides; Dollar Near 2-Week High And Gold Steady Above $2,500 &#8211; Global Markets Today While US Slept</a></li>
</ul>
Image: Photo by Sharon McCutcheon on Unsplash

Dollar's Dominance Faces Challenges, But Demise Is Decades Away: Analyst

The U.S. greenback has seen a stellar run so far this year, with&nbsp;Invesco DB US Dollar Index Bullish Fund (ARCA:UUP) logging a 2.8% return. However, things may go downhill in the coming days, with the Fed expected to cut rates in September.
<h2>Market Forecast: Dollar Weakening Against Yen</h2>
Geoffrey Yu, senior EMEA market strategist at BNY, shared his outlook on the U.S. dollar&#39;s performance against major currencies, telling CNBC that the dollar may continue to weaken against the Japanese yen through the end of the year. This is especially true given that the Bank of Japan is on a policy tightening mode, which could strengthen the yen against the greenback.
On Wednesday, the dollar was trading 0.6% higher at 146.09 yen around 11:50 AM London time. This followed a dip below the significant 145-yen level for the first time since Jan. 6, indicating a recent surge in the yen and a continued unwinding of the yen-funded carry trade, the CNBC article noted.
<h2>Carry Trade Explained</h2>
Carry trades involve borrowing in a currency with low interest rates and investing in higher-yielding assets. This strategy has been popular due to expectations that the Japanese yen will remain weak and Japanese interest rates will remain low. However, recent interest rate hikes from the Bank of Japan have strengthened the yen, contributing to a global market sell-off.
<h2>Outlook for Yen Carry Trade Unwinding</h2>
The yen carry trade began to unwind earlier this month as Bank of Japan rate hikes bolstered the currency. Although some stabilization has occurred, strategists, including Yu, believe the unwinding process is ongoing.
Given the above-mentioned facts, the bearish trend in the greenback is likely to continue, at least in the near term.
<h2>ETFs to Buy for Weakening Dollar</h2>
So, investors looking to play the weakening U.S. dollar could consider these exchange-traded funds (ETFs):
<h3>Inverse Dollar Fund</h3>
Needless to say, if the dollar is falling, a short position on the currency would result in negative returns. Invesco DB US Dollar Index Bearish Fund (ARCA:UDN) should thus be avoided.
<h3>Commodities: Gold</h3>
The decline in the U.S. dollar is good for raw materials and commodities as these are priced in the U.S. dollar. SPDR Gold Shares (ARCA:GLD) has gained 21.7% this year due to a sudden dollar weakness and geopolitical tensions.
Large-Cap ETFs
Since large-cap stocks have greater foreign exposure, the weakening dollar is positive for this capitalization. BofA Global Research once estimated that every 10% drop in the U.S. dollar translates into about a 3% boost to S&amp;P earnings. SPDR S&amp;P 500 ETF Trust (ARCA:SPY) should thus be closely watched.
<h2>ETFs to Sell for Weakening Dollar</h2>
<h3>U.S. Dollar</h3>
The dollar weakness can surely be played with UUP and WisdomTree Bloomberg U.S. Dollar Bullish Fund (ARCA:USDU).
<h3>Small-Cap ETFs</h3>
Since small caps are closely tied to the U.S. economy and do not get affected by a rising dollar due to their limited foreign exposure, iShares Russell 2000 ETF (ARCA:IWM) could be a weak pick now, in this context.
<h3>Dollar-Denominated Bond ETFs</h3>
Investors seeking EM exposure amid a falling dollar should not consider dollar-denominated EM bond ETFs. These funds invest in sovereign debt from a variety of emerging nations via U.S. dollar-denominated securities. Notably, the debt route is less risky than equities. Moreover, most emerging markets have low debt levels compared to the developed countries.
SPDR Bloomberg Emerging Markets USD Bond ETF (ARCA:EMHC) is one such ETF. The underlying Bloomberg Emerging USD Bond Core Index measures the performance of fixed-rate US dollar-denominated debt issued by sovereign and quasi-sovereign emerging market issuers. The fund yields 5.39% annually and is up 2.7% this year.
<a href="https://www.zacks.com/stock/news/2325978/u-s-dollar-to-drop-ahead-etfs-to-gain-lose?cid=CS-BENZ-FT-etf_news_and_commentary-2325978">To read this article on Zacks.com click here.</a>

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U.S. Dollar to Drop Ahead? ETFs to Gain/Lose

The final 2023 policy meeting for the Federal Reserve will most likely end with the decision to hold interest rates where they are. As dull as this appears on the surface, it will not be a &#8220;ho-hum&#8221; moment <a href="https://www.benzinga.com/markets">for financial markets</a>.
Market participants are looking for signs that cement the view that rate hikes are done with, and that they can expect rate cuts to begin in the first half of 2024. Any other interpretations coming from Wednesday&#8217;s Fed statement will be a huge disappointment and would likely spur sharp market reactions.
Economic analysts now expect the Federal Reserve to hold policy settings at this week&#8217;s meeting, accompanied by a more dovish tone in the statement. This would be &#8220;on message&#8221; to expectations that the Fed will deliver a first-rate cut at least by May.
&#8220;At the Wednesday meeting, we expect the Fed to take the initial steps in changing its communication from hawkish holds to dovish holds,&#8221; said Mark Cabana, rates strategist at Bank of America.
Also Read: <a href="https://www.benzinga.com/markets/equities/23/12/36155946/uaws-return-to-work-pushes-us-jobs-growth-higher-but-dark-clouds-hover-over-retail-sector">UAW&#8217;s Return To Work Pushes US Jobs Growth Higher, But Dark Clouds Hover Over Retail Sector</a>
<h2 class="wp-block-heading">Data Supports More Dovish Expectations</h2>
Data since the November meeting has pointed to moderation in economic activity, slowing inflation and — <a href="https://www.benzinga.com/markets/equities/23/12/36155946/uaws-return-to-work-pushes-us-jobs-growth-higher-but-dark-clouds-hover-over-retail-sector">Friday&#8217;s non-farm payrolls</a> report aside — a cooling labor market.
The dollar index (DXY) has fallen 2.8% since the November meeting, while the Invesco US Dollar Index Bullish ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), an exchange-traded fund that tracks dollar longs, is down 1.8%. Its counterpart, the Dollar Index Bearish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>) has gained 3.1% over the same period.
Higher interest rates support the dollar, and the DXY has been on the decline since early October &#8211; when data began to show inflation was slowing and markets heard the first hints of dovish rhetoric from the Fed&#8217;s Open Market Committee (FOMC) members.
At the same time, equity markets have been rallying in hopes of lower rates. Since Oct. 27, when it began its most recent rally, the SPDR S&amp;P 500 (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), an ETF that tracks the benchmark U.S. equity index, has rallied an impressive 12%.
<h2 class="wp-block-heading">Or Will The Fed Push Back?</h2>
While expectations are for rate cuts to come, there&#8217;s still a few analysts who believe the Fed could push back on these hopes on Wednesday.
The question is, they say, can the Fed afford to let the markets dictate central bank policy?
&#8220;The bigger story is likely to be contained in the individual Fed member forecasts – how far will they look to back the market perceptions that major rate cuts are on their way? We strongly suspect there will be a lot of pushback here,&#8221; said James Knightley, chief international economist at ING.
<h2 class="wp-block-heading">Inflation Remains Key To Fed Thinking</h2>
Ahead of the Federal Reserve decision on Wednesday is the publication on Tuesday of November consumer price inflation data, and this could be pivotal. The <a href="https://www.benzinga.com/economics/macro-economic-events/23/11/35775608/us-inflation-eases-more-than-expected-in-october-cements-expectations-for-end-of-">October report</a> showed headline inflation had dropped to 3.2% from 3.7% in the previous month and, given the rate of decline in energy prices during November, the headline rate is likely to have slowed further.
Indeed, the price of gasoline paid at the pump now <a href="https://www.benzinga.com/news/23/12/36157601/gas-poised-to-fall-below-3-a-gallon-but-spare-a-thought-for-the-heavily-priced-europeans">averages a little over $3 a gallon</a>. &#8220;We are just 7 cents from the national average price of gasoline falling to its lowest level since 2021. Current national average: $3.12/gal,&#8221; said Patrick de Haan, energy analyst at GasBuddy, in a Tweet on Monday.
The latest <a href="https://www.benzinga.com/etfs/broad-u-s-equity-etfs/23/12/36154833/us-consumer-sentiment-sharply-rebounds-in-december-up-16-1-year-over-year-inflation-ex">consumer confidence report by Michigan University</a> noted a fall in inflation expectations, adding further fuel to the argument that price pressures will ease further.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: &#8220;We now expect this measure of inflation expectations, which is often referenced by Fed officials, to fall further over the next couple of months, likely dipping below the cycle low, 2.7% in September last year.&#8221;
Cabana at Bank of America added: &#8220;The Fed&#8217;s confidence has likely grown that its current policy stance is appropriate and sufficiently restrictive. The next policy action will likely be a cut, in our view.&#8221;
Now Read: <a href="https://www.benzinga.com/etfs/broad-u-s-equity-etfs/23/12/36154833/us-consumer-sentiment-sharply-rebounds-in-december-up-16-1-year-over-year-inflation-ex">US Consumer Sentiment Sharply Rebounds As Inflation Expectations Decline</a>

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Federal Reserve Meets Wednesday: Will Powell Signal Rate Cuts In 2024?

The U.S. dollar fell sharply against the Japanese yen on Thursday as foreign exchange traders interpreted comments by Bank of Japan governor Kazuo Ueda to suggest the central bank will soon end its negative interest rate policy.
The U.S. currency fell 2.6% against the yen (USD/JPY) in early trading on Thursday. The yen also gained strongly versus other rivals, climbing 2.4% against the euro and 2.7% on the U.K. pound.
Exchange traded funds that track both long and short positions on the yen were also big movers. ProShares UltraShort Yen (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/YCS#NYSE">YCS</a>) fell 3.7%, while the ProShares Ultra Yen (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/YCL#NYSE">YCL</a>), which tracks bullish interest, surged 3.5% early trading on Thursday.
Meanwhile, the Invesco US Dollar Index Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) was down 0.2% in early trading, while the Invesco US Dollar Index Bearish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>) gained 0.3%.
<h2 class="wp-block-heading">Policy Tightening Expected From BoJ</h2>
The moves were in response to comments from Governor Ueda on the sustainability of Japan&#8217;s negative rates policy. Ueda said that monetary policy management would &#8220;become even more challenging from the year-end and heading into next year,&#8221; suggesting rates could be raised imminently.
Japan&#8217;s negative rates policy began in January 2016, setting the short-term interest rate at -0.1% and targeting the yield on the 10-year Japanese Government Bond (JGB) at 0%, with a cap at 1%. The BoJ made its first steps into unwinding the policy in November by removing the cap on the JGB, instead suggesting it now become a reference rate.
Also Read: <a href="https://www.benzinga.com/news/23/12/36119267/the-time-to-own-gold-is-now-greg-weldon-sees-breakout-for-bullion">&#8216;The Time To Own Gold Is Now&#8217;: Greg Weldon Sees Breakout For Bullion</a>
Earlier in the week, BoJ Deputy Governor Ryozo Himino said in a speech that Japan&#8217;s aging population of savers would benefit from higher net interest income if rates were to rise.
But the pace of such rises is unlikely to move the needle on yen sentiment a great amount. After four decades of benign inflation, the BoJ is entering new territory and will likely do so very cautiously.
&#8220;We see scope for the market to be disappointed over the pace with which the BoJ is willing to withdraw policy accommodation over the next year or so,&#8221; said Jane Foley, senior FX strategist at Rabobank.
&#8220;That said, we expect the currency pair (USD/JPY) to shift lower in the second half of next year on the back of Fed rate cuts and a very gradual unwind in BoJ policy accommodation.&#8221;
<h2 class="wp-block-heading">Is Dollar/Yen Carry Trade Over?</h2>
As the Fed cuts rates and the BoJ starts to raise, FX markets could see a long-term driver of USD/JPY gains begin to fade as the carry trade becomes more risky.
The carry trade sees currency investors profit from interest rate differentials: forex traders borrow in low yielding currencies such as the yen, to invest in higher-yielders such as the dollar. Such has been the weight of the carry trade, the dollar has gained more than 40% against the yen in the past two years.
&#8220;We doubt USD/JPY will start correcting well in advance before the Fed's first rate cut, given the magnitude of carry,&#8221; said Shusuke Yamad, FX and rates strategist at Bank of America.
The Fed is still expected to make its first rate cut in the first half of 2024, possibly May.
Now Read: <a href="https://www.benzinga.com/news/23/12/36072260/dollar-climbs-have-investors-overdone-the-dovish-fed-trade">Dollar Climbs: Have Investors Overdone The Dovish-Fed Trade?</a>
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Dollar Dives Vs. Yen: BoJ Governor Signals End In Sight For Negative Interest Rates

The dollar inched higher on Monday as equity markets took a breather from their recent rally, leaving some investors wondering whether <a href="https://www.benzinga.com/economics/macro-economic-events/23/12/36047939/fed-chair-powell-remains-cautious-premature-to-declare-victory-on-inflation-prepa">dovish calls on U.S. interest rates</a> were becoming stretched.
The dollar index (DXY), a weighted measure of the dollar&#8217;s value against a basket of rival currencies, inched 0.3% higher to 103.57. Although still down from its 2023 peak above 107, the index has endured three-consecutive weeks of losses, working in contrast to equity markets which have soared since the end of October.
&#8220;We suspect November&#8217;s 3% decline was a bit too much. A bounce could lift it back to the 104.70-105.00 before it falls out of a favor again,&#8221; said Marc Chandler, chief forex strategist at Bannockburn Global Forex.
Exchange traded funds that track dollar bullish behavior have moved lower in recent weeks, while those tracking bearish sentiment have increased. On Monday, the Invesco DB US Dollar Index Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) was up 0.5%, while the Invesco DB US Dollar Index Bearish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>) was down 0.3%.
Also Read: <a href="https://www.benzinga.com/news/23/12/36045365/dollar-dumps-in-november-as-fed-rate-cut-optimism-increases">Dollar Dumps In November As Fed Rate Cut Optimism Increases</a>
<h2 class="wp-block-heading">Have Fed Rate Cut Expectations Become Overstretched?</h2>
Much of the recent downtrend for the dollar and uptrend for the equity markets has been based around expectations the Federal Reserve will begin cutting interest rates in the first quarter of 2024. 
These expectations have been underpinned by falling inflation rates, but not by any rhetoric from the Fed itself.
&#8220;Rate cuts in the first half of 2024 are being priced into many economies given the downside recession risks and some more promising data on inflation. We disagree, and think that stickiness in inflation will keep central banks on hold for longer,&#8221; said James Pomeroy, economist at HSBC.
<h2 class="wp-block-heading">Chairman Powell Retains Cautious Tone</h2>
Markets were a little jarred on Friday after Fed Chairman Jerome Powell declined to play the dovish card in an interview and, instead, <a href="https://www.benzinga.com/economics/macro-economic-events/23/12/36047939/fed-chair-powell-remains-cautious-premature-to-declare-victory-on-inflation-prepa">called for restraint</a> in drawing premature conclusions about future policy moves.
&#8220;While lower inflation readings of the past few months are welcome, this progress is going to need to continue if we are to reach our 2% objective,&#8221; he said.
Powell added that if necessary, the Fed was still prepared to tighten policy rates further.
&#8220;Inflation is unlikely to sustain the very low levels seen in the post-global financial crisis years and central bankers have good reason to remain cautious about prematurely cutting interest rates. This suggests scope for the market to be disappointed in the pace of rate cuts,&#8221; said Jane Foley, senior FX strategist at Rabobank.
Now Read: <a href="https://www.benzinga.com/economics/macro-economic-events/23/12/36047939/fed-chair-powell-remains-cautious-premature-to-declare-victory-on-inflation-prepa">Fed Chair Powell Remains Cautious: &#8216;Premature&#8217; To Declare Victory On Inflation</a>
Photo: Shutterstock

Dollar Climbs: Have Investors Overdone The Dovish-Fed Trade?

The U.S. dollar made something of a comeback in the last two days of November, following a month of losses as markets leveraged rising expectations the Federal Reserve will start cutting rates in the first <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/36028726/we-are-now-at-the-soft-landing-economists-markets-react-to-subdued-pce-inflation-da">quarter of 2024.</a>
Although the dollar index (DXY) was fractionally lower on Friday, during the final two days of November the DXY gained a cumulative 0.6%.
But analysts believed the rally would be short-lived while equities continued to surge and rate cut optimism remained high. Bank of America FX strategist Athanasios Vamvakidis said: &#8220;We are bearish on the dollar into 2024 — we could see a correction from oversold positions into the year end, but would sell the bounce for a 2024 decline.&#8221;
Also Read: <a href="https://www.benzinga.com/markets/equities/23/11/35985582/dollar-decline-stock-market-rally-explains-70-of-recent-us-dollar-downtrend-says-bofa">Dollar Decline: Stock Market Rally Explains 70% Of Recent US Dollar Downtrend</a>
<h2 class="wp-block-heading">Dollar Decoupling</h2>
In November, as investors&#8217; appetite for risk led to major gains in the equity markets, the dollar largely diverged from its usual drivers tied to the economy, geopolitics, and policy. Instead, it became the anti-equity trade.
As the S&amp;P 500 stock index climbed 8.9% during November, the dollar index (DXY) fell 3.1%. During the same period, the SPDR S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), an exchange-traded fund that tracks the S&amp;P 500, gained 9.1%.
Among the major currency crosses, the dollar&#8217;s worst performance during November was against the New Zealand dollar (NZD/USD) — down 4.6%. The dollar lost 3.6% versus the British pound (GBP/USD) and was down 2.6% against the euro (EUR/USD).
The performance of exchange traded funds tracking investment behavior in the dollar also illustrated market sentiment towards the U.S. currency. The Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) fell 2.5% during November, while the Invesco DB US Dollar Index Bearish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>) rose 3.3%.
<h2 class="wp-block-heading">Treasury Market Rally — Yields Retreat From 5%</h2>
The biggest market driver during the month was rising expectations that the Federal Reserve had ended its cycle of interest rate hikes, after the central bank left its main Fed Funds Rate at 5.25%-5.5% at its September and November policy meetings.
Expectations of a more dovish Fed at the Dec. 13 meeting were further driven by data that showed <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/36028726/we-are-now-at-the-soft-landing-economists-markets-react-to-subdued-pce-inflation-da">inflation becoming more benign</a>. Consumer price data in early November showed the annual headline inflation rate dropping to 3.2%, while the rate as measured by personal consumption expenditures — the Fed&#8217;s favored measure — fell to 3%. The Fed&#8217;s target rate is 2%.
Hopes of a more dovish Fed also spurred a rally in the U.S. government bonds market. Prices climbed, driving yields lower from 16-year highs. Having peaked at 5.02% in October, the 10-year Treasury yield was down to 4.32% on Friday.
The iShares Core U.S. Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>), an exchange traded fund that tracks the broad U.S. bond market, gained 4.3% during November.
Now Read: <a href="https://www.benzinga.com/news/23/11/36004201/november-rally-sets-treasury-bonds-on-track-for-best-month-in-40-years">November Rally Sets Treasury Bonds On Track For Best Month In 40 Years</a>
Photo: Shutterstock

Bonds

Dollar Dumps In November As Fed Rate Cut Optimism Increases

Since hitting an 11-month high in early October, the US dollar index (DXY) has fallen 3.8% and this has been largely due to investors backing the recent <a href="https://www.benzinga.com/news/23/11/35940569/investors-ditch-us-dollar-at-the-fastest-pace-in-a-year">equity market rally</a>, analysts at Bank of America said on Tuesday.
The dollar has long been regarded as a safe-haven asset. Keeping investments tied up in dollar assets during times of market upheaval has been among the classic &#8220;risk-off&#8221; trades, along with gold.
And the reverse is also true, as BofA analyst Adarsh Sinha indicated — saying most of the dollar sell-off has been down to the equity market rally, which saw the S&amp;P 500 index climb 10.5% since Oct. 27 as investors have become more bullish on risk.
Also Read: <a href="https://www.benzinga.com/news/23/11/35940569/investors-ditch-us-dollar-at-the-fastest-pace-in-a-year">Investors Ditch US Dollar At The Fastest Pace In A Year</a>
<h2 class="wp-block-heading">Market Performance Indicates Higher Risk Appetite</h2>
The equity market rally has been driven by double-digit percentage gains in the shares of tech giants such as Microsoft Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NASDAQ">MSFT</a>) and Apple Inc. (NASDAQ: AAPL, while chip producer Intel Corporation (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/intc#NASDAQ">INTC</a>) has jumped 24% in the past month.
At the same time, the VIX index, a measure of equity market volatility also known colloquially as the Wall St &#8220;fear gauge&#8221; has <a href="https://www.benzinga.com/fintech/23/11/35967483/vix-at-pre-pandemic-low-is-wall-streets-fear-gauge-mispricing-risk-of-downturn">fallen to its lowest levels</a> since before the COVID-19 pandemic.
Dollar exchange-traded funds have also illustrated similar risk strategies: the Invesco DB US Dollar Index Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) is down 3% since Nov. 1, while the Invesco DB US Dollar Index Bearish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>) is up 3.8% over the same period.
&#8220;Over 70% of the estimated dollar move is attributable to the equity rally — better risk sentiment — with narrower U.S. rate differentials, lower energy prices and China optimism contributing only marginally,&#8221; Sinha said.
<h2 class="wp-block-heading">Dollar Decoupling</h2>
This focus on risk sentiment essentially decouples the dollar from its traditional drivers such as economic growth, rate differentials and geopolitical risk. But can the current euphoria in the equity markets keep the dollar down for long?
&#8220;In the weeks ahead we expect choppy activity as asset prices react to economic data releases in the hope of second-guessing Fed policy,&#8221; said Jane Foley, senior FX strategist at Rabobank.
Again, it will come down to the Fed. With markets pricing in a Fed rate cut by the end of the first quarter, dollar weakness could last into the New Year should equity markets enjoy a Santa rally.
So far, equity investors have largely ignored signs that a U.S. economic slowdown is gathering pace. The labor market appears to be loosening while manufacturing PMI is below the 50 level, which indicates economic contraction.
Instead of the implications on corporate growth, investors are focusing on what the slowdown means for the interest rate outlook.
&#8220;Factors other than the improvement in global risk sentiment need to drive the momentum from here,&#8221; Sinha concluded.
Now Read: <a href="https://www.benzinga.com/fintech/23/11/35967483/vix-at-pre-pandemic-low-is-wall-streets-fear-gauge-mispricing-risk-of-downturn">VIX At Pre-Pandemic Low: Is Wall Street&#8217;s Fear Gauge Mispricing Risk Of Downturn?</a>
Photo: Shutterstock

AAPL

INTC

MSFT

Dollar Decline: Stock Market Rally Explains 70% Of Recent US Dollar Downtrend, Says BofA

Investors are ditching U.S. dollar holdings at the fastest pace seen in a year as they position for an end to the Federal Reserve&#8217;s rate hike cycle and look ahead to possible <a href="https://www.benzinga.com/news/23/11/35872246/fomc-minutes-could-provide-markets-with-a-sobering-reminder-of-higher-for-longer">rate cuts in the first few months of 2024</a>.
The dollar index (DXY) has lost nearly 3% since the start of November, putting the measure — which tracks the performance of the dollar against a basket of rival currencies — on course for its worst month in more than a year.
In the same period of time, the Invesco DB USD Index Bearish ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>), which tracks bearish sentiment on the dollar, has gained 2.8%, while the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), tracking bullish sentiment, has fallen 2.3%. 
<h2 class="wp-block-heading">Asset Managers Selling Dollar Positions</h2>
According to data from State Street, published on Friday in the Financial Times, asset managers are on track to sell 1.6% of their open dollar positions this month, the largest monthly outflow since November 2022.
The bank added that asset managers had sold &#8220;significant&#8221; dollar holdings each day since the Nov. 3 payrolls report that showed unexpectedly weak jobs growth.
Also Read: <a href="https://www.benzinga.com/news/23/11/35856564/foreign-buyers-desert-us-treasury-bond-market-as-supply-increases">Foreign Buyers Desert US Treasury Bond Market As Supply Increases</a>
State Street&#8217;s data is not the first evidence that dollar assets are being sold. Recent <a href="https://www.benzinga.com/news/23/11/35856564/foreign-buyers-desert-us-treasury-bond-market-as-supply-increases">Treasury Department data showed</a> foreign investors were net sellers of U.S. government bonds (Treasuries) in September to the tune of $1.7 billion. This was the first time foreign investors were net sellers in more than two years.
The iShares iBonds Dec 2033 Term Treasury ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IBTO#NASDAQ">IBTO</a>), which tracks the performance of the 10-year Treasury, was down 1.9% in morning trade on Friday.
<h2 class="wp-block-heading">Fed Rate Hike Cycle At An End?</h2>
Pressure on dollar assets is coming from rising expectations that the Federal Reserve&#8217;s cycle of interest rate increases to tackle inflation is at an end. The Fed made its last rate hike in July setting the Fed Funds rate at between 5.25% and 5.5%, and has held the rate there at two subsequent meetings.
Earlier this month inflation data showed that consumer prices were dropping faster than the market expected. On this day alone, the dollar index dropped 1.5%. Furthermore, economists now believe a downturn in growth is on the way as job growth slows and post-pandemic demand fades.
&#8220;The U.S. data are likely to confirm a sharp slowdown at the start of the fourth quarter, and the market is pricing in nearly four rates cuts by the Federal Reserve, with around a 75% chance the first one is in next May,&#8221; said Marc Chandler, chief market strategist at Bannockburn Global Forex.
Jane Foley, senior FX strategist at Rabobank, agreed: &#8220;The market now anticipates that the Fed may be at the peak of the hiking cycle and currently sees potential for a rate cut in the first quarter of 2024.&#8221;
Recent dollar losses, however, are only a partial unwind of the massive rally seen in the first three quarters of 2022 as the Fed embarked on its policy tightening program.
Between Jan. 1 and Sept. 28, the dollar index jumped 28% from 95.97 to a peak of 114.78. The measure currently stands at 103.63.
Now Read: <a href="https://www.benzinga.com/markets/equities/23/11/35936275/barclays-plans-to-cut-up-to-2000-jobs-to-save-up-to-1-25b-report">Barclays Plans To Cut Up To 2000 Jobs To Save Up To $1.25B: Report</a>
Photo: Shutterstock

Treasuries

IBTO

Investors Ditch US Dollar At The Fastest Pace In A Year

Robert Kiyosaki, the author of the best-selling book &#8220;Rich Dad, Poor Dad,&#8221; blamed the leaders for the <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/35820947/us-economy-gearing-towards-soft-landing-amid-inflation-concerns-says-economists">inflationary situation in the economy.</a>
What Happened: Kiyosaki pointed out that there are perils with the two political ideologies: capitalism and Marxism. &#8220;True capitalist&#8221; bring down prices, which will lead to a deflationary spiral, the Japanese-American entrepreneur said.
On the other hand, Kiyosaki noted that Marists raise prices, which in turn stokes inflation. &#8220;Our leaders are Marxists which is why we have inflation,&#8221; he said.
Consumer price inflation in the U.S., though having pulled back from the highs seen in the summer of 2022, remains elevated and well out of the Fed&#8217;s target of 2%.
See Also: <a href="https://www.benzinga.com/money/best-inflation-stocks">Best Inflation Stocks</a>
Why It&#8217;s Important: Kiyosaki has always identified himself as anti-Democratic and has taken swipes at President Joe Biden. In mid-October, he said in a post on X under Biden the world is at war, inflation is wiping out the poor and middle class, and the economy crashing.
<a href="https://www.benzinga.com/news/23/10/35323620/rich-dad-poor-dad-author-robert-kiyosaki-says-biden-has-done-everything-people-were-afraid-president">Calling Biden a &#8220;puppet of the WOKE liberal left,&#8221; </a>the author called for impeaching the president.
On Wednesday, Kiyosaki said, &#8220;Protect yourself from our Marxist leaders.&#8221; He also wheedled out of his usual investment advice of investing in gold, silver, and Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>). Gold and silver are safe-haven bets, which investors flock to during times of uncertainties. 
The best-selling author asked his followers to stay away from the U.S. dollar. He has said the dollar will collapse when the Federal Reserve begins to reverse the string of rate hikes it has implemented since March 2022.
The Invesco DB US Dollar Index Bearish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>) fund rose 0.69% to $19.05 in premarket trading on Wednesday, according to<a href="https://benzinga.grsm.io/lxquj26b2sag"> Benzinga Pro data. </a>The SPDR Gold Shares (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) gained 0.16% to $185.65 and the iShares Silver Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SLV#NYSE">SLV</a>) advanced 0.37% to $21.85.
Image Credits &#8211; Shutterstock
Read Next:<a href="https://www.benzinga.com/economics/macro-economic-events/23/11/35903926/november-fomc-minutes-fed-leans-toward-rate-stability-as-inflation-eases"> November FOMC Minutes: Fed Leans Toward Rate Stability As Inflation Eases</a>

Coverage of Bitcoin, Etherum, Ripple and all the latest digital currencies.

Cryptocurrency

$BTC

Robert Kiyosaki Of 'Rich Dad, Poor Dad' Fame Sounds Alarm On Inflation: 'Protect Yourself From Our Marxist Leaders'

Michael Hartnett, chief investment strategist at Bank of America, projected the start of a bear market for the U.S. dollar, predicting a 20% loss in the U.S. dollar index (DXY).
According to the most recent &quot;The Flow Show&quot; from Hartnett, markets are entering a new period of conflict, geopolitical isolationism, populism, fiscal excess, state intervention, regulation&nbsp;and redistribution. These factors will result in a world with 3%-4% inflation and 3%-4% interest rates.
Over the longer term, the strategist anticipates a 20% depreciation of the U.S. currency and maximum 3%-4% yearly gains from credit and equities. We remain &ldquo;patient bears in a world of impatient bears,&quot; the expert stated.
The biggest exchange-traded fund tracking the U.S.&nbsp;dollar index is the&nbsp;Invesco DB US Dollar Index Bullish Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/uup#NYSE">UUP</a>), which is down by 2% year-to-date. The&nbsp;Invesco DB USD Index Bearish ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/udn#NYSE">UDN</a>) instead is an inverse or short U.S. Dollar ETF.&nbsp;
Read Also: <a href="https://www.benzinga.com/money/currency-etfs" target="_blank">Benzinga&#39;s Quick Guide to&nbsp;Currency ETFs</a>
Hartnett&#39;s Dollar Bearishness: Six Reasons
<ol>
<li>Skyrocketing U.S. budget deficit:&nbsp;U.S. federal deficit was $1.8 trillion&nbsp;past 12 months, 6.5% of GDP</li>
<li>U.S. debt ceiling deadline approaching with budget deficit of $378 billion&nbsp;in March, shrinking cash balances to just $109 billion. The U.S. government&nbsp;is on track to run out of cash by July 4.</li>
<li>Rising U.S. debt default probabilities: 5Y CDS at 45 basis points versus&nbsp;15 basis points&nbsp;a year ago.</li>
<li>U.S. banking crisis means U.S. dollar less of a &quot;safe haven.&quot;</li>
<li>The &quot;petroyuan&quot; idea gathers pace as war forces countries to deal in different currencies.</li>
<li>China and Japan reducing Treasury holdings;&nbsp;foreigners own $7.4 trillion&nbsp;of Treasuries.</li>
</ol>
&nbsp;
&nbsp;
Hartnett Turns&nbsp;Bullish on Gold: Hartnett argues the U.S. dollar is presently in its fourth bear market in the last 50 years, which bodes well for gold, oil, the euro&nbsp;and international stocks. However, the analyst noted that because pessimism is so strong right now, with nearly two full percentage points of Fed cuts priced in from June to the election, he expects the dollar to trade in range in the near-term&nbsp;once the Fed stops its hiking cycle on May 3.
<img alt="" src="https://www.benzinga.com/files/u1363475/dxy_2023-04-14_16-02-28_eb105.png" style="height:100%; width:756px" />Monthly chart of the U.S. dollar index (DXY) (with Hartnett&#39;s notes): The arrows represent the dollar&#39;s bear market &ndash; Chart: TradingView
Read Next:&nbsp;<a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/03/31491961/sell-the-last-rate-hike-bofa-sees-stock-market-tumbling-on-bearish-sentiment-region" target="_blank">&#39;Sell The Last Rate Hike&#39;: BofA Sees Stock Market Tumbling On Bearish Sentiment, Regional Bank Run</a>
Photo: Shutterstock
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Short Ideas

BofA Chief Strategist Calls For A 20% US Dollar Selloff, Turns Bullish On Gold And The Euro

Hedge Funds

Doubleline Capital CEO Gundlach Says Sees Dollar Closing Down For 2019

The U.S. Dollar dropped sharply Thursday after Secretary of the Treasury Steven Mnuchin said the United States wanted a weaker currency. The dollar had already fallen sharply since President Trump took office.
While a weaker dollar inflates asset prices which is likely the reason for the comment, it hurts lower and middle income Americans as buying power degrades and inflation jumps higher. Anyone who is not invested heavily in the stock market is seeing their real buying power drop with oil prices surging and other prices jumping in response.
Investors, on the other hand, are loving it. Those with millions and billions invested in the stock market are noticing that every time the dollar drops, the stock market jumps higher. In fact, it can be argued that there is a bubble in the stock market because of the weaker dollar.
The bottom line is, we should all be careful of this uber weak dollar policy. There will be repercussions in the future for all Americans.
In looking at the stock chart, it clearly shows the exact spot it will fall to. Using the PowerShares DB USD Index Bullish (UUP), the U.S. Dollar will hit major pivot highs from 2012 and 2013 at $23.00. That means there is still some near-term downside because a technical support is tagged.
Lastly, please be aware that just like with Federal Reserve policy on massive money printing and how global central banks followed suit, other governments will start to devalue their currency in response. This ultimately is a long-term positive for gold, silver and Bitcoin. <img height="640" src="https://www.inthemoneystocks.com/images/posts/Gareth%20Soloway/UUP01.24.2018.PNG" style="cursor: move; color: rgb(0, 0, 0); font-family: &quot;Times New Roman&quot;; font-size: medium;" width="621" />

Movers & Shakers

Politics

Events

American Buying Power Degraded: Dollar Slammed By Trump Administration

Vexing currency market observers, the PowerShares DB US Dollar Index Bullish Fund (NYSE: <a class="ticker" href="/stock/uup#NYSE">UUP</a>) is down 8.4 percent year to date. That is an arguably stunning decline when considering the Federal Reserve has boosted interest rates twice this year.
UUP, the exchange-traded fund proxy for the U.S. Dollar Index, is also one of this year&#39;s worst-performing currency ETFs. The ETF measures the dollar&#39;s performance against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.
Predictably, UUP&#39;s technical outlook is currently unappealing. The ETF resides nearly 10 percent below its 52-week high and more than 5 percent below its 200-day moving average. UUP has not closed above its 200-day line since May and resides 2.3 percent below its 50-day line.
<h3>Temper Those Expectations</h3>
The global interest rate outlook could be weighing on the dollar&#39;s performance this year even with the Fed having boosted borrowing costs twice with plans for another rate hike before the end of 2017.
&ldquo;That is to say, if interest rates in Europe and other developed markets rise by a greater margin than rates in the US, tighter Federal Reserve policy wouldn&rsquo;t necessarily equate to a stronger dollar,&rdquo; said PowerShares <a href="https://www.blog.invesco.us.com/weak-us-dollar-and-commodities">in a recent note</a>. &ldquo;And indeed, this has been the case thus far in 2017. Interest rate spreads between the US and other regions have converged significantly. From Dec. 26, 2016, through July 31, 2017, the US dollar was down 10.1%, as measured by the US Dollar Index (DXY).&rdquo;
Last month, interest rates rose in Canada for the first time in seven years and some bond market participants believe the European Central Bank could consider a rate hike next year, perhaps explaining why the euro is one of this year&#39;s best-performing currencies.
<h3>More Considerations</h3>
The dollar&#39;s gyrations can seep into other areas of financial markets. For examples, prolonged dollar weakness could fuel a rebound in commodities, potentially stoking inflation along the way.
&ldquo;Rising commodity prices could raise inflation expectations &mdash; putting upward pressure on long-term interest rates and likely keeping the Fed on course for further monetary tightening,&rdquo; said PowerShares. &ldquo;In turn, increased interest rate volatility often bleeds into equity volatility, as higher rates reduce the present value of discounted future equity earnings. During times of stock market turbulence, commodities can serve as a viable alternative for investors.&rdquo;
Traders betting UUP&#39;s weakness will not abate anytime soon can consider the PowerShares DB US Dollar Index Bearish Fun (NYSE: <a class="ticker" href="/stock/udn#NYSE">UDN</a>), an inverse though not leveraged counterpart to UUP.
Related Links:
<a href="https://www.benzinga.com/trading-ideas/long-ideas/17/08/9851720/the-energy-sector-rally-has-some-doubters">Energy Rally Has Doubters</a>
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/17/08/9868511/impact-on-apple-etfs-following-analyst-downgrade">Nibbling At Apple ETFs</a>

Long Ideas

Dollar ETF Looks To Shed Its Bearish Ways

The U.S. dollar has lost 7 percent of its value against a basket of international currencies but this could prove to be a catalyst for certain stocks, Erin Gibbs, a portfolio manager with S&amp;P Global said during a recent <a href="http://www.cnbc.com/2017/07/19/the-dollar-drop-is-great-news-for-these-stocks.html">&quot;Trading Nation&quot; segment.</a>
One of the better-positioned sectors to take advantage of the weakness in the greenback is the consumer discretionary sector, <a href="https://www.benzinga.com/topic/erin-gibbs">Gibbs</a> explained. While the sector as a whole has &quot;average exposure&quot; to international sales when it comes to actual earnings growth the weakness implies &quot;a lot less overhang&quot; moving forward.
&quot;That might be your one safe bet when it comes to a dollar play,&quot; she emphasized.
On the other hand, sectors like health care, energy, utilities and real estate have relatively low exposure to foreign revenue, which isn&#39;t encouraging for the sectors, Gibbs continued. This is because when companies bring home overseas cash it is able to convert it to <a href="https://www.benzinga.com/markets/forex">U.S. dollars</a> at a better rate.
But investors expecting a rebound in the U.S. dollar are advised not to buy into stocks within those four sectors, as the group is expected to report negative earnings growth. This is especially true for health care stocks, which are simultaneously tackling with ongoing uncertainty from the White House.
&quot;So even if the dollar does better, it&#39;s still not looking great,&quot; Gibbs added.
Related Links:
<a href="https://www.benzinga.com/news/17/07/9787299/u-s-dollar-in-trouble-bears-in-control">U.S Dollar In Trouble, Bears In Control</a> 
<a href="https://www.benzinga.com/markets/commodities/17/07/9777463/a-cautious-fed-sends-equities-to-record-highs-dollar-dips">A Cautious Fed Sends Equities To Record Highs, Dollar Dips</a>
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What Sectors Should Investors Buy And Avoid Given Weak American Dollar?

The Federal Reserve raised interest rates earlier this week, marking the second time this year that the U.S. central bank has boosted borrowing costs. That move by the Fed has helped the PowerShares DB US Dollar Index Bullish Fund (NYSE: <a class="ticker" href="/stock/uup#NYSE">UUP</a>), widely viewed as a dud this year among developed market currency exchange-traded funds, to a gain of more than 0.5 percent this week.
<h3>U.S. Dollar ETF: UUP</h3>
UUP is the ETF proxy on the U.S. Dollar Index, providing investors with exposure to the dollar&#39;s move against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.
&ldquo;UUP is well off of its peak levels in terms of assets under management, and has not been helped by sizable outflows year-to-date of over $215 million,&rdquo; said <a href="http://streetonefinancial.com/">Street One Financial</a> in a note out Thursday. &ldquo;Since its inception back in 2007, we have seen the fund at or north of $1 billion at times, so the current participation in the product in terms of assets under management may demonstrate some hesitation in the U.S. Dollar, since the currency has given back all of the gains and then some that it registered immediately following Trump&rsquo;s election last November.&rdquo;
<h3>Within A Broader Context</h3>
Over the past month, investors have pulled $70.3 million from UUP, but UUP&#39;s bearish counterpart, the PowerShares DB US Dollar Index Bearish Fund (NYSE: <a class="ticker" href="/stock/udn#NYSE">UDN</a>), has seen modest inflows over the same period. UDN is more than a decade old and has nearly $43 million in assets under management, nearly 10 percent of which has flowed into the fund over the past month.
&ldquo;Given the recent pressure outside of today&rsquo;s rally, it would not be surprising to see an uptick in interest in UDN for those investors whom may have turned bearish on the U.S. Dollar in the past several months,&rdquo; said Paul Weisbruch.
The Federal Open Market Committee&#39;s recent meeting minutes reveal 12 of 16 Fed governors are advocating for another rate hike this year, bringing the 2017 total to three, and the same number are in favor of three more rate hikes next year. That <a href="https://www.benzinga.com/trading-ideas/long-ideas/16/12/8813787/making-some-green-with-dollar-etfs">could bode well for UUP </a>over the medium term.
Related Links:
<a href="https://www.benzinga.com/news/17/06/9609279/fed-hikes-rates-without-disrupting-the-market-classic-yellen">Fed Hikes Rates Without Disrupting The Market: 'Classic Yellen'</a>
<a href="https://www.benzinga.com/federal-reserve/17/06/9613639/fed-reaction-markets-knew-what-was-coming-and-behaved-accordingly">Fed Reaction: Markets Knew What Was Coming And Behaved Accordingly</a>

Dollar ETF Keeps Looking To The Fed

The PowerShares DB US Dollar Index Bullish (NYSE: <a class="ticker" href="/stock/uup#NYSE">UUP</a>) is down 0.8 percent on Tuesday following <a href="http://www.benzinga.com/analyst-ratings/analyst-color/17/01/8911584/heres-what-to-expect-following-trumps-drug-pricing-robbe">surprising remarks</a> from President-elect Donald Trump. Trump told the <a href="https://www.benzinga.com/news/17/01/8911113/donald-trump-u-s-dollar-is-too-strong">Wall Street Journal</a> that the U.S. dollar is &ldquo;too strong&rdquo; and the fact that China&rsquo;s currency is &ldquo;dropping like a rock&rdquo; makes it difficult for U.S. companies to compete with Chinese companies.
<h3>Is Trump The End Of USD's Bull Run?</h3>
In the past, Trump has accused China of being a currency manipulator, and the implication that he will take on the issue once in office has the dollar trading down.
Traders concerned that Trump may usher in an end to the dollar bull market have plenty of investment options out there.
<h3>Investor Options</h3>
First, a falling U.S. dollar is typically good news for commodities. For example, the SPDR Gold Trust (ETF) (NYSE: <a class="ticker" href="/stock/gld#NYSE">GLD</a>) is up 1.3 percent on Tuesday.
Dollar weakness would mean relatively strong performance from international currencies as well. The WisdomTree Dreyfus Emerging Currency Fd (NYSE: <a class="ticker" href="/stock/cew#NYSE">CEW</a>) provides exposure to eleven different international currencies.
In addition, investor can also buy shares of the inverse Powershares Db Us $ Index (NYSE: <a class="ticker" href="/stock/udn#NYSE">UDN</a>).
When it comes to stocks, U.S. companies with the most international business are best-positioned for a falling dollar. These companies include Wal-Mart Stores Inc (NYSE: <a class="ticker" href="/stock/wmt#NYSE">WMT</a>), McDonald&rsquo;s Corporation (NYSE: <a class="ticker" href="/stock/mcd#NYSE">MCD</a>) and The Coca-Cola Co (NYSE: <a class="ticker" href="/stock/ko#NYSE">KO</a>).

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Winners And Losers From Trump's U.S. Dollar Comments

In an upset of epic proportions, Republican nominee Donald Trump is now president elect after defeating Democratic rival Hillary Clinton.
<h3>Volatility And Victory</h3>
As Election Day turned to Election Night with the contest shaping up to be closer than recent polling data suggested, global financial markets tumbled, confirming that a broad range of asset classes would react negatively to a Trump victory. Leading up to the election, there was no shortage of speculation assets, regions and sectors that <a href="http://www.benzinga.com/trading-ideas/long-ideas/16/10/8518160/this-etf-really-doesnt-want-donald-trump-to-win">could bemoan a Trump victory</a>.
Markets reflected as much Tuesday night, with U.S. equity futures tumbling, Asian markets getting crushed and the dollar sliding. Dollar weakness reminds investors gold and exchange-traded funds such as the SPDR Gold Trust (ETF) (NYSE: <a class="ticker" href="/stock/gld#NYSE">GLD</a>) offer upside potential in the coming days.
<h3>Gold's Bull Case</h3>
Adding to the bull case for gold is the potential for more dollar erosion as investors and traders now come to grips with the notion that bets may now be off for the Federal Reserve boosting interest rates in December. Investors have plunked down more than $40 million into the PowerShares DB US Dollar Index Bullish Fund (NYSE: <a class="ticker" href="/stock/uup#NYSE">UUP</a>), the U.S. Dollar Index-tracking ETF, over the past month, <a href="https://www.invesco.com/portal/site/us/financial-professional/etfs/tools/flow-trend-tracker">according to PowerShares data</a>.
However, with a rate hike most likely no longer imminent, UUP&#39;s bearish cousin, the PowerShares DB US $ Index (NYSE: <a class="ticker" href="/stock/udn#NYSE">UDN</a>) could be poised to benefit if the greenback enters a prolonged slump.
<h3>Fixed-Income ETfs</h3>
Keeping with the theme of the Fed not hiking rates in the wake of Trump&#39;s victory, obvious fixed-income ETF beneficiaries include long-dated bond funds such as the ProShares UltraShort Lehman 20+ Yr(ETF) (NYSE: <a class="ticker" href="/stock/tbt#NYSE">TBT</a>).
Investors with a taste more rate-sensitive bond ETF may want to consider the PIMCO 25 Yr Zro Cupn US Ty Inx Fd ETF (NYSE: <a class="ticker" href="/stock/zroz#NYSE">ZROZ</a>) and the Vanguard Extended Duration ETF (NYSE: <a class="ticker" href="/stock/edv#NYSE">EDV</a>).
Highly sensitive to interest rates, &ldquo;zero-coupon bonds often sell at a sizable discount to face value because buyers do not get a steady stream of income as they do with traditional bonds. As zero-coupon Treasurys get close to maturity, their values increase with buy-and-hold investors getting the full value of the bond when it matures,&rdquo; according to <a href="http://www.etftrends.com/2016/07/investors-make-a-fed-bet-with-this-etf/">ETF Trends</a>. 
Trump&#39;s victory may be handcuffing the Fed when it comes to raising rates this year, in turn increasing the allure of ETFs like EDV and ZROZ.
<h3>Bellwether Coal</h3>
An industry ETF to consider is the Market Vectors-Coal ETF (NYSE: <a class="ticker" href="/stock/kol#NYSE">KOL</a>). KOL has, quite miraculously, more than doubled this year even as Clinton looked strong and levied harsh rhetoric against the coal industry. That rhetoric proved costly as Trump carried most of the major coal-producing states, including becoming the first Republican since 1988 to win Pennsylvania.
Perhaps KOL was a legitimate Trump indicator that few acknowledged. It will be interesting to see if the coal ETF can keep rising now that its preferred candidate is the next U.S. president.

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iShares Trust Barclays 20+ Year Treasury Bond Fund

PIMCO 25+ Year Zeroupon US Treasury Index Fund

ZROZ

These ETFs Should Enjoy Trump's Victory

SPDR Gold Trust (ETF) (NYSE: <a class="ticker" href="/stock/gld#NYSE">GLD</a>), the world&#39;s largest bullion-backed exchange-traded product, is up 24.4 percent year-to-date, while the ETF that acts as a proxy for the U.S. Dollar Index is off 4.5 percent. And for some investors, the equation is that simple. Gold rises when the dollar falls. When the greenback is strong, gold and other dollar-denominated commodities suffer.
Historical data confirm that over the last 45 years, gold performs well when the dollar languishes, is solid when the dollar is flat and loses ground when the greenback gains momentum. There are reasons this relationship exists.
<h3>Why The Relationship?</h3>
&ldquo;There are various reasons why the asymmetry between gold and the dollar exists. We believe that two of those reasons stand out,&rdquo; according to <a href="https://www.spdrs.com/library-content/public/Golds_Relationship_with_the_Dollar_Dont_Count_Gold_Out_with_a_Strong_Dollar_081816.pdf">State Street Global Advisors research</a>. &ldquo;First, gold is one of the multiple currencies that exist in the monetary system, as its use by central banks in their foreign reserves makes clear. So, the link between gold and the dollar should not be seen in isolation, but in relationship to other currencies as well. Second, while important, the dollar is just one of the many drivers that influences gold, and that complexity can alter the negative correlation between the two.&rdquo;
<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/news/16/08/8391512/the-crowded-gold-trade-gets-thinned-out">The Crowded Gold Trade Gets Thinned Out</a></bzrelatedlink>
For gold bugs, there is nothing wrong with safe-haven demand, and 2016&#39;s market action is, to this point, reminding investors of gold&#39;s utility. In fact, gold has proven its mettle during market crises ranging from the Soviet sovereign debt crisis to the Long Term Capital Management meltdown to the global financial crisis.
Further boosting the case for gold is weak earnings growth in the United States and low and negative yields on sovereign debt throughout the developed world.
<h3>Not So Fast...</h3>
However, it is also worth noting that gold and the dollar do not always move inversion of each other. Both are considered safe-haven assets, so there are times when such assets are in favor, that the dollar and gold rise in unison.
&ldquo;In periods of uncertainty, the dollar typically benefits from flight-to-quality flows. But so does gold. At such times, both the price of gold and the dollar can go up. Investors have seen this in recent years, including during the 2008&ndash;2009 financial crisis, the 2010&ndash;2011 European sovereign debt crisis or, more recently, in the aftermath of the UK referendum to leave the European Union,&rdquo; added SSgA.
As SSgA confirm, gold&#39;s historical correlations to other asset classes, namely stocks and bonds, is low, increasing the yellow metal&#39;s allure as a portfolio diversifier.
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