Investors bearish on the dollar have generated attractive returns in the current environment.
The bearish dollar play is currently an interesting story from a lot of angles, Kathy Kriskey, Invesco’s head of alternatives product strategy for ETFs, told VettaFi. While the dollar has already weakened substantially, many analysts still expect the dollar to continue to decline.
The decrease in U.S. exceptionalism and foreign money moving out of U.S. markets are two factors responsible for putting weakness on the dollar, according to Kriskey.
Under the Hood of Invesco's Bearish Dollar ETF
The Invesco DB US Dollar Index Bearish Fund (UDN ) makes money when the dollar goes down. Therefore, UDN is designed for investors who want a cost-effective and convenient way to track the value of the U.S. dollar relative to a basket of the six major world currencies. Those are the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc
Furthermore, UDN tracks a rules-based index composed solely of short U.S. Dollar Index futures contracts that trade on the ICE futures exchange. The USDX futures contract is designed to replicate the performance of being short the U.S. dollar against the basket currencies.
The currency ETF has $137 million in AUM. It has taken in over $80 million in net flows year to YTD through May 2. In the past one-month period alone, UDN has seen $65 million in inflows.
UDN is up 9.4% YTD through May 2. But there still could be room for the fund to generate more returns for investors bearish on the dollar.
UDN is the inverse play against the Invesco DB US Dollar Index Bullish Fund (UUP ). UUP has $284 million in AUM. It has seen $123 million in net outflows year to date through May 2.
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