Will Dollar Index Strengthen in the Second Half of 2017?



Dollar index in 1H17

In the first half of 2017, the Dollar Index (UUP) remained on a downward slope. The dollar index fell nearly 6.8% in the first half of 2017. The PowerShares DB US Dollar Index Bullish Fund (UUP) and the WisdomTree Bloomberg US Dollar Bullish ETF (USDU), which tracks the performance of the Dollar Index, fell nearly 7.4% and 7.3%, respectively, in the first half of 2017.

The Fed continued its gradual rate hike process in 1H17. In spite of the gradual rate hike, the Dollar Index weakened in 1H17. The delay in policy reforms is the primary factors hampering the movement of the Dollar Index. In their June 2017 monetary policy review meetings, both the European Central Bank and the Bank of England signaled a hawkish stance in the near future.

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Will Dollar Index strengthen in 2H17?

A weaker currency generally weakens a country’s outlook. If we see major reforms in the second half of 2017 and the major US (SPY) (QQQ) economic indicators post strong figures, then we might see some improvement in the US Dollar Index. However, a stronger dollar hampers the performance of US exports.

In the next part of this series, we’ll analyze the performance of the financial sector.


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