The U.S. dollar faced significant headwinds in the first half of 2016 as the Federal Reserve held fire on raising interest rates due to global economic uncertainty, the Brexit outcome, slumping commodity prices and mixed domestic economic data. The U.S. dollar bulls re-emerged in late August 2016 after Fed Chair Janet Yellen’s speech at Jackson Hole alluded to the possibility of two interest rate hikes before the end of 2016. Additionally, the strong performance of the financial sector in August 2016 suggests that a rate rise is imminent.

These four strong dollar exchange-traded funds (ETFs) provide a cost-effective way for traders and investors to profit from a rising dollar.

PowerShares DB U.S. Dollar Bullish ETF

The objective of the PowerShares DB U.S. Dollar Bullish ETF (NYSEARCA: UUP), launched in February 2007, is to mirror the price and yield performance of the Deutsche Bank Long U.S. Dollar Futures index before expenses. It attempts to achieve this by investing in long futures contracts. The benchmark index tracks the performance of the U.S. dollar against a basket of currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. The ETF has a spread of 0.04% and provides strong liquidity, with average daily volume of 1.6 million shares, making it a suitable investment vehicle for traders as well as investors.

The PowerShares DB U.S. Dollar Bullish ETF has $765 million in net assets. It has an expense ratio of 0.75%, which is higher than the category average of 0.66%. The strong dollar ETF had returned -3.24% year to date (YTD) as of Sept. 1, 2016; however, it has performed better over the past month, returning 0.61%.

Wisdom Tree Bloomberg U.S. Dollar Bullish ETF

The Wisdom Tree Bloomberg U.S. Dollar Bullish ETF (NYSEARCA: USDU), formed in 2013, seeks to exceed the performance of the Bloomberg Dollar Total Return Index. The underlying index is designed to appreciate if the U.S. dollar rises against a basket of global currencies from developed and emerging markets. This is achieved by investing the majority of the ETF's assets in money market derivatives such as forward currency contracts. The fund’s average daily spread is 0.21%.

The Wisdom Tree Bloomberg U.S. Dollar Bullish ETF is cheaper that UUP, with an expense ratio of 0.5%; however, it is not as liquid with average daily volume of roughly 159,000 shares. Although the ETF has a YTD and one-year return of -3.69% and -2.08%, respectively, it had returned 0.57% over the past month as of Sept. 1, 2016.

ProShares UltraShort Euro ETF

Created in 2008, the ProShares UltraShort Euro ETF (NYSEARCA: EUO) attempts to return twice the inverse daily performance of the euro spot price against the U.S. dollar. As the fund has a daily reset mechanism, long-term returns can significantly deviate from targeted multiple amounts, so it is better suited toward investors and traders who don’t require predictable returns. It provides ample liquidity, with 593,939 shares trading daily and has a tight average spread of 0.05%.

The ProShares UltraShort Euro ETF has $376 million in net assets and an expense ratio of 0.93%. The fund had returned -5.76% YTD as of Sept. 1, 2016. Its three- and five-year annualized returns are 8.9% and 7.35%, respectively. The strong dollar ETF is currently trading at $24.06, and its 52-week range is between $22.45 and $27.18.

ProShares UltraShort Yen ETF

The ProShares UltraShort Yen ETF (NYSEARCA: YCS), launched in November 2008, seeks to provide twice the inverse daily performance of the USD/JPY exchange rate. Long-term results are unpredictable as the fund is rebalanced daily. The ETF has an average daily volume of 138,449 shares and a spread of 0.04%.

The ProShares UltraShort Yen ETF has performed poorly YTD, returning -28.66%; returns have tracked the dollar higher over the past month, however, returning 1.55% as of Sept. 1, 2016. The fund has a healthy five-year annualized return of 8.94%.

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