King Dollar ETFs Assert Their Royalty

The U.S. dollar, also referred to as “king dollar,” has easily regained that royal status as investors price in robust U.S. economic data and the potential for the Federal Reserve to raise interest rates sometime in the next several months.

To this point in Monday’s session, just seven exchange traded funds have made new 52-week highs and two of those ETFs are the PowerShares DB U.S. Dollar Index Bullish Fund (UUP) and the WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) .

UUP, the U.S. Dollar Index (DXY) tracking ETF, and the actively managed USDU are up an average of 6.6% this year. That is to say investors have done nearly six times better betting on the dollar than they have being bullish on the S&P 500. The greenback is in the midst of one of its best rallies in its illustrious history and “is up over 21% in the past 39 weeks, which is the third largest 39-week rally in the history of the US Dollar,” according to Chris Kimble of Kimble Charting Solutions.

Investors are not shying away from bullish bets on the greenback. Over the past month, UUP has added nearly $ 70 million in new assets, a total surpassed by just six other PowerShares ETFs. USDU has added $ 5.6 million since the start of February, bringing its assets under management total to $ 319.5 million, a fine start for an ETF is just 15 months old. [Bullish Bets Pile up on Dollar ETFs]

USDU allocates about its half its weight to short positions in the euro and yen, placing the ETF firmly in position from some of the loosest monetary policies in the developed world. The ETF also pairs the U.S. dollar against its Australian and Canadian rivals along with the Chinese yuan. Central banks in all three of those countries have lowered interest rates this year. [Dollar ETFs Winning Currency Wars]

Now, dollar sentiment is decidedly in favor of the bulls. SentimenTrader notes dollar sentiment is 87% bullish, indicating few traders are bold enough to get in the way of the soaring greenback.

” Think about this, should the US$ do nothing more than reach its 50% level of the all-time highs in 1985 and the lows of 2008, it would have to rally another 20%! This is NOT a prediction, its sharing where key long-term price levels come into play,” adds Kimble.

Table Courtesy: Kimble Charting Solutions