The dollar index rose to above 99, the highest since May of 2020 as investors flock to the safe-haven U.S. Dollar amid the escalating Russia-Ukraine war. The U.S. Dollar Index measures the value of the United States dollar relative to a basket of U.S. trade partners' currencies — The Euro, Swiss Franc, Japanese Yen, Canadian dollar, British pound, and Swedish Krona. The Index goes up when the U.S. dollar strengthens when compared to other currencies.
Last week, stronger-than-expected U.S. jobs report lifted the expectations of more aggressive action from the U.S. Federal Reserve — giving the greenback investors a positive signal. Fed Chair Powell has recently pointed to a 25-basis point rate hike in March but hinted at a more hawkish move if inflation does not subside. The most pronounced buying activity was against the euro, with inflation in Europe soaring to a record high of 5.8% in February. As of Monday, March 7th, 12:09 PM GMT +1, the EUR/USD has fallen to 1.0834 — its lowest since April 2020.
Investors pump funds into Invesco's dollar ETF
Investors have added this year over $150 million into the Invesco DB US Dollar Index Bullish Fund (UUP) – one of the largest Currency ETFs in the market. A Currency ETF provides investors with exposure to a single currency or a basket of currencies. The funds are comprised of currency futures contracts.
The UUP ETF seeks to track the Deutsche Bank Long USD Currency Portfolio Index - Excess Return – a rules-based index composed solely of long U.S. Dollar Index futures contracts that trade on the ICE futures exchange (USDX futures contracts). Investors who buy UUP track the value of the U.S. dollar relative to a basket of the six major world currencies - the Euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. UUP has a total expense ratio of 0.78% and trades primarily on the NYSE Arca. Since war erupted in Ukraine, UUP gained roughly +2.3%.
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