How Long Will The Reversal Of The Dollar Last?

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Includes: EEM, USO, UUP, XME
by: BubbleBustInvesting

Summary

The dollar reversed course today following the Brussels terrorist attack.

Energy, commodity, and emerging markets reversed course, too.

But the reversal may not last too long.

The dollar reversed course today on Wall Street, following the horrific Brussels terrorist attack.

At 10:30 am, the US Dollar Index was 0.18% higher from yesterday's closing, reversing a 1.48% decline over the previous five trading sessions. The dollar was particularly strong against the Euro and the British Pound, as European investors sought a safe haven in American assets.

The US Dollar Index Performance

One-Day*

5-Day

+0.18%

-1.48%

Click to enlarge

*As of 10.30AM

Source: Marketwatch.com

The US Dollar vs The Euro and the British Pound

Exchange Rate

One-day

EUR/USD

-0.17%

GBP/USD

-1.11%

Click to enlarge

*As of 10.30AM

Source: Marketwatch.com

The reversal of the dollar was followed by a reversal in commodity and energy markets, which had rallied with the weak dollar in the previous trading session.The SPDR S&P Metals and Mining ETF (NYSEARCA:XME), for instance, lost close to one percent in early morning trade, reversing gains over the previous five trading sessions.

Emerging markets were also weak, with iShares MSCI Emerging Markets (NYSEARCA:EEM) losing 0.57%.

Oil was heading south, too. The United States Oil Fund was 1.32% lower from yesterday's closing.

Major Market Indexes

ETF/Index

One-Day Performance

Five-Day Performance

SPDR S&P 500 Trust

-0.22%

+0.98

SPDR S&P Metals And Mining

-0.91

+8.27

iShares MSCI Emerging Markets

-0.57

5.02

United States Oil (NYSEARCA:USO)

-1.32

+4.97%

Click to enlarge

*As of 10.30AM

Source: Finance.yahoo.com

But the reversal of the dollar trade may not last for too long. For two reasons: first, the impact of this tragedy on the real European economy doesn't appear to be significant, and currency markets will quickly shake it off, as was the case with the Paris attack, back in November.

Second, it may provide yet another excuse for the Federal Open Market Operations Committee (FOMC) to defer interest rates hike one more time.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.