The second quarter saw a weak start no doubt in the U.S. weighing on the dollar. But the resilient U.S. dollar resumed its strength over the past couple of weeks thanks to the Fed rate hike bets. In fact, the U.S. Dollar Index rose nearly 4% in the same period, erasing most of the spring losses. The surge in the greenback brought back the appeal for currency hedged ETFs and this trend is likely to continue in the summer months.
This is especially true as a raft of upbeat economic data of late and an accelerating job market indicate that the world’s largest economy is improving after the first-quarter slump. If this continues, the Fed might finally increase the interest rates for the first time since 2006, albeit at a slower pace. The first rate hike might be due for September. Given this, monetary policies in the U.S. and the other developed and developing countries are on divergent paths, lending continued strength to the U.S. dollar (read:Â Currency Hedged ETFs Top Q1 Asset Flows). Â Â
