As investors abandon stocks and precious metals, the US dollar has rallied. The PowerShares DB US Dollar Bullish Fund (UUP) is up over 3% in the past 3 months compared to a 11% decline in equities over the same time period.
The dollar has enjoyed a comeback as market concerns over European debt has weakened the Euro. The PowerShares DB US Dollar Bullish Fund (UUP) is up nearly 6% over the past three weeks while the Market Vectors Double Short Euro ETN (DRR) is up 15% over the same period.
The dollar suffered one its worst weeks in decades as the Fed announced plans to print money at a faster rate. Last Wednesday, the Fed announced a plan to pump an additional $1.15 trillion into the economy through the purchase of long-term Treasury bonds and other actions.
Amid a slowing global economy and an uncertain outlook for the future, investors have piled into the dollar as a safe haven investment. Year-to-date, the dollar is up relative to almost every world currency including up 10% against the Euro and up 4% against the Yen.
U.S. investors have fully embraced the idea of diversifying their portfolios with international equities. However, investing outside the border of the U.S. exposes portfolios to currency fluctuations.