ETF of the Day - US Dollar ETF (UUP)

In theory the Federal Reserve pumping $85 billion into bonds each month would be negative for the US Dollar. However when the currency is compared to its peers around the world it is not surprising that the US Dollar Index is trading near a 9-month high.

The other major currencies around the world have been falling due to action that is outside the control of the US. The Japanese Yen (FXY) is at the lowest level in over 4 years versus the US Dollar as the Bank of Japan is devaluing its currency in hopes to fight deflation. And they are doing it in a bigger fashion that the Fed – believe it or not!!

The Euro (FXE), another major global currency has been struggling the last few months as there is talk of more action by the European Central Bank and the fears in that region remain elevated. The same can be said for the UK Pound (FXB) and the Swiss Franc (FXF).

The end result is the US Dollar becoming the best of the worst as far as currencies are considered around the globe.

The chart below shows the PowerShares US Dollar Index Bullish ETF (UUP) over the last year. You can see the action today (5/22/13) on the right-hand side and the turnaround it had during the trading session. This was due to the belief the Fed may stop their quantitative easing sooner rather than later and this would lead to even more strength in the greenback.

I view UUP as a hedge against the eventual end of the Fed easing. However, I do not think that will occur in the coming months.