This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Global Macro: Dollar Continues Higher as Foreign Economies Remain Weak

The PowerShares DB US Dollar Index Bullish (UUP) continues to trend higher as foreign economies remain hampered by weakness.

U.S. stimulus tapering, alongside continued easy policy in Japan and a credit rating downgrade in the European Union, has led the U.S. dollar to remain one of the strongest currencies in the developed world.

The Federal Reserve chose to taper stimulus on Wednesday, as policymakers stated the benefit of bond purchases had been reduced due to a ballooning balance sheet. The economy has also improved with both a stronger labor market and improved business activity. The positive data has allowed for a stable environment to reduce stimulus in.

The strength of the U.S. dollar has also been magnified by weak foreign policy. The Bank of Japan released comments on Friday that intended on leaving its unprecedented stimulus unchanged through 2013. The dollar's move higher against the yen has allowed the BOJ to avoid spending increases, while benefitting from economic growth through increased exports.

Against the euro, the dollar has also gained relative strength. Standard & Poor's downgraded the European Union on Friday. The downgrade comes a day after the EU reached a deal to overhaul the region's banking sector. The deal has been criticized by many as not doing enough to assure an improvement in the risk management of financial markets.

The S&P report stated that the EU region's commitment to running a balanced budget was in question. Although the move by the ratings agency is hotly debated, it nonetheless reflects a weak economic environment.

With the two major currencies that trade against the dollar weakening, it seems as if the U.S. currency's rally has the fuel to move higher. Look for higher interest rates to sustain the rally into 2014.

UUP Chart
UUP data by YCharts

At the time of publication the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
UUP $25.52 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%
TSLA $218.42 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs