Bad News For Global Economy Is Good News For The Dollar, ETFs

The global economy is putting on the brakes, leading to a surge in the dollar and its exchange traded funds (ETFs).

The greenback is at a six-month high against the euro on speculation that as the global economy cools off, our currency will heat up, report Ye Xie and Gavin Finch for Bloomberg.

The dollar is on track for its biggest one-month gain since the euro debuted in 1999, and is at an 11-month high against the Australian dollar. It’s also making gains against the New Zealand Dollar, the British Pound sterling and the Swedish krona.

The sharpest advance this month is against the Australian dollar, by 10.1%, while the slowest was 1.4% against the Mexican peso.

The PowerShares DB US Dollar Index Bullish (UUP) is up 0.3% year-to-date, and 5.2% in the last month.

ETFs that could be muscled aside by a stronger dollar include:

• CurrencyShares Australian Dollar Trust (FXA), down 1% year-to-date; down 9.6% in the last month
• ELEMENTS British Pound (EGB), down 6.5% since March 26 inception; down 6.3% in the last month
• iPath EUR/USD Exchange Rate ETN (ERO), up 3.2% year-to-date; down 5.6% in the last month
• Market Vectors Double Short Euro (DRR), up 11.8% since May 22 inception; up 13% in the last month
• CurrencyShares Swedish Krona Trust (FXS), up 2.1% year-to-date; down 4.8% in the last month

For full disclosure, some of Tom Lydon’s clients own shares of UUP.

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

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