Pro-Dollar Fund Sells Out! Why the World's Biggest Traders are Betting on a Dollar Rally

By Kat Von Rohr

A quiet story is developing in the currency world this month. So quiet that you won’t see this story splashed across Bloomberg or scrolling across a CNBC screen.

Indeed our own in-house researchers are currently contacting inside representatives at an official Federal Agency for more details as they become available.

So I can’t tell you everything yet. But I can say this developing story will impact all your dollar-based investments this quarter…and possibly next quarter.

Here’s the odd part: This story is NOT happening in the $4 trillion foreign exchange market. We’re not seeing huge droves of FX traders pour into a particular currency. We’re not hearing some ground-breaking Forex data that will sink a currency on trader’s screens this month.

Instead, this currency story is unfolding right on the regular old New York Stock Exchange (NYSE) with your average big-name stock and commodity players…

Traders are Betting on the Buck – the Only Way They Can

In short, the biggest industry players in the stock and commodity markets are betting on a turnaround rally for the U.S. dollar this year.

How can we tell? Simple.

All the major institutional players buy the same dollar fund from the NYSE when they see a dollar rally coming. It’s the most popular “pro-dollar” fund in the U.S. – the PowerShares DB U.S. Dollar Bullish fund (NYSE: UUP).

Since November, shares of this fund have been selling out.

In fact, PowerShares has gone back to the Securities Exchange Commission (SEC) twice since then to request more shares of this dollar bull fund. Reason? They simply don’t have enough shares to meet investor’s demand to buy dollars.

In fact, this small $300 million fund has grown to $3 billion in just the last year on this increased investment demand.

According to the SEC’s website, the SEC just granted PowerShares permission to create more 240 million new shares of this fund two days ago.

But there is no telling how long these new shares of UUP will last when all these stock guys see a dollar rally on the horizon.

Frankly, we agree. A short-term dollar rally IS coming in early 2010. The major stock players know it, and they’re smart to hedge their stock positions with this dollar fund.

But honestly, buying a dollar bull fund is really just scratching the surface of how you can play any short-term dollar strength. That’s why all our short-term Forex editors are researching short-term opportunities to play a turnaround in the dollar. We’ll be back to you soon with more ways to do just that.

As I mentioned, this story is still unfolding. So my fellow editors have more on this dollar rally story as it becomes available. Tilll then...good currency investing!

Average rating
(0 votes)