Dollar Rally Gains Steam As Traders Scale Back Fed Rate Cut Bets—These ETFs Are Climbing

The U.S. dollar is headed for its strongest weekly performance in more than two months on Friday as Treasury yields climbed and traders scaled back expectations for Federal Reserve rate cuts.

The U.S. Dollar Index rose to 99.15 at 4:12 a.m. ET, gaining about 1.3% for the week. The move boosted dollar-linked ETFs, including the Invesco DB US Dollar Index Bullish Fund (NYSE:UUP) and WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSE:USDU).

Invesco DB US Dollar Index Bullish Fund

UUP is among the biggest beneficiaries of the rising dollar. It offers exposure to 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.

The fund has assets under management (AUM) of $348.7 million and trades in an average daily volume of around 2 million shares. UUP charges 0.70% in annual fees and has gained nearly 1% over the past week.

Benzinga Edge Stock Rankings indicate that UUP maintains a strong price trend in the medium and long term.

WisdomTree Bloomberg U.S. Dollar Bullish Fund

USDU offers exposure to the U.S. dollar by tracking the Bloomberg Dollar Total Return Index. It has $368.5 million in AUM and trades an average of 336,000 shares per day.

The fund has an expense ratio of 0.51% and has gained 0.3% over the past week.

Benzinga Edge Stock Rankings indicate that USDU maintains a strong price trend in the short and medium terms.

Factors Driving the U.S. Dollar Higher

Rising energy prices, hotter-than-expected inflation data and supply disruptions tied to tensions around the Strait of Hormuz fueled expectations that the Federal Reserve could keep interest rates higher for longer, according to Reuters.

According to the CME FedWatch tool, markets were pricing in nearly a 50% probability that rates would remain elevated through December, up sharply from a week earlier.

U.S. producer prices rose sharply in April, while consumer inflation also accelerated, reinforcing concerns that inflationary pressures remain persistent.

Meanwhile, retail sales continued to show resilience, suggesting consumers are still spending despite higher borrowing costs.

Jeff Rosenberg, senior portfolio manager at BlackRock Inc. (NYSE:BLK), said Thursday that inflation pressures may actually be nearing a peak.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.

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