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US Dollar ETFs React To Japanese Yen Intervention (UUP, UDN, UDNT, UUPT, FXY)

Courtesy of John Nyaradi.

US Dollar ETFs such as PowerShares DB US Dollar Index Bullish (AMEX:UUP) and PowerShares DB 3x Long US Dollar Index Futures (AMEX:UUPT) rose today against the Japanese Yen after the Bank Of Japan sold off nearly 7 Trillion Yen to weaken the currency.

The US Dollar rose significantly compared to the Japanese Yen today, and several US Dollar ETFs reacted sharply to the upward trend.  The PowerShares DB US Dollar Index Bullish (AMEX:UUP) ETF rose 1.94% today, as it directly correlates to US dollar prices.  Today was also a good day to be investing in the PowerShares DB 3x Long US Dollar Index Futures ETN (AMEX:UUPT), as it rose 6.09% today.  This ETN tracks the US Dollar on a long position, and today’s rise created enormous wealth in this currency ETF.

The Japanese intervention, though strong, is likely to be short lived, as Japan’s Yen continues to face higher prices due its perceived perception as a safer currency then US Dollars or Euros.  This “safer” currency mentality likely comes from fears about Europe and a possible Chinese bubble.  (AMEX:UUP) and (AMEX:UUPT) are likely to be contenders for profitable dollar ETF trading, as long as The Bank Of Japan keeps injecting Yen into the system, and Europe remains on firm footing after last weeks debacle.

On the other side of the spectrum, PowerShares DB US Dollar Index Bearish (AMEX:UDN) and its brother ETN PowerShares DB 3x Short US Dollar Index Futures (AMEX;UDNT) reacted negatively to the dollar rising, as (AMEX:UDN) dropped nearly 2% today while (AMEX:UDNT) dropped a whopping 5.22%.  Both of these ETFs track the dollar inversely, with (AMEX:UDN) and (AMEX:UDNT) shorting the market.  It is likely that as the Japanese Yen recovers from the Bank of Japan’s sell off, the US dollar will fall and (AMEX:UDN) and (AMEX:UDNT) will be very profitable investments and an easier way to make money on a falling US dollar.  However, if the current “fiat” currency rally continues, in which markets continue to rise on continued positive Euro and US economic sentiment, then these ETFs would be the first on the chopping block.

Lastly, the CurrencyShares Japanese Yen Trust (AMEX:FXY) ETF reacted very negatively to the Bank of Japan’s Yen sell-off, dropping nearly 3.13%.  This ETF will likely rebound in the next few days as the Yen corrects its down spell, but in the meantime (AMEX:FXY) is a good ETF to watch in relation to (AMEX:UDN) and (AMEX:UUP) as far as deciding how to invest in US Dollar ETFs.

Bottom Line: The Bank Of Japan sold nearly 7 trillion Japanese Yen today, and the dollar rose substantially in response.  As a result, US dollar ETFs such as (AMEX:UUP) and (AMEX:UUPT) reacted positively because they track the dollar directly; while US dollar ETFs such as (AMEX:UDN) and (AMEX:UDNT) reacted negatively because they are designed to short the dollar.  (AMEX:FXY), on the other hand, is an ETF to watch in the next few days, as today’s intervention is likely just a blip on the map and the Yen will likely remain strong.

ETF Summary:

PowerShares DB US Dollar Index Bullish (AMEX:UUP): +0.41, +1.94%

PowerShares DB 3x Long US Dollar Index Futures ETN (AMEX:UUPT): +1.10, 6.09%

PowerShares DB US Dollar Index Bearish (AMEX:UDN): -0.55, -1.92%

PowerShares DB 3x Short US Dollar Index Futures (AMEX:UDNT): -1.08, -5.22%

CurrencyShares Japanese Yen Trust (AMEX:FXY): -4.07, -3.13%

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