Surprise! Dollar Bulls Overwhelm ETF (UUP)
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In a curious trend, the Powershares DB U.S. Dollar Bullish Fund (NYSE: UUP) had to file with the SEC to create 100 million new shares of the ETF in order to meet investor demand.
UUP is an exchange-traded fund that is controlled by Deutsche Bank and distributed by Invesco Capital Management. The shares had been bought at an abnormal rate, 13 times the daily volume scooped up on Wednesday, and 9 times the average on Thursday before the stock was halted pending the announcement.
UUP shares track the performance of the U.S. dollar against a basket of six other major currencies.
This bullish bets on the dollar are counterintuitive to the Fed's announcement Wednesday that they will maintain their easy money policy and keep interest rates low for some time.
The fund's shares will move up when the dollar strengthens, however for the last month the dollar has underperformed against most of the world's major currencies driving the price of the UUP stock down from its November 2008 52-week high of $27.14, down 17 percent.
The major move into the bullish dollar ETF shows that investors are going to ignore what the Fed had to say on Wednesday, and bet that the U.S. dollar is going to rebound.
The total trading volume of the shares of UUP jumped to a record high of 10.9 million on Wednesday, followed by today's volume of 9 million before the suspension. Today's volume ended at 13.3 million.
"This bullish trend on the shares shows that investors believe that now may be the time to get in on the dollar," Tom Lydon of Global Trends Investments told StreetInsider.com. "Investors are telling themselves that this may not be the bottom of the dollar, but I want to get in on it early."
Lydon noted that he does not know when the additional shares will be available for trading pending approval from the SEC.
Themis Trading's Joe Saluzzi was astounded by the news, calling the dollar "garbage."
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Dollar Up
Bob Kelly on Nov 6, 2009 01:46 AMCounter-intuitive the way the printing presses are running.