The Dollar Rallies - How to Play It

The U.S. Dollar is finally trading to the upside after hitting a 15 month low, as we've told our readers before the way to play the dollar momentum is using the PowerShares DB US Dollar Index Bearish (NYSE:UDN) and the PowerShares DB US Dollar Index Bullish (NYSE:UUP).

The UUP is trading up today at $22.39 a share and the UDN is down trading at $28.40, both ETFs are moving less than 1% in either direction.  What are the UUP and UDN?  Review Playing the U.S. Dollar: UUP or UDN?

CURRENCY NEWS
(AP) Investors are also keeping a close eye on the dollar, which won a brief respite Monday after U.S. Federal Reserve chairman Ben Bernanke said the central bank was monitoring developments in foreign exchange markets closely and that current monetary policies "will help ensure that the dollar is strong and a source of global financial stability."

Jean-Claude Trichet, the president of the European Central Bank, described Bernanke's comments on the dollar as "very important" and saying the euro was not designed to be a reserve currency.

Jane Foley, research director at Forex.com, said Trichet's comments were interesting given that currency markets have given up on hope that President Barack Obama will get Chinese authorities to allow the yuan to rise against the dollar during his visit to China.

Because the yuan is pegged at an artificially low level against the dollar, the U.S. currency offsets that strength by weakening against currencies that are traded more freely, such as the euro and yen. In the last month or so, the euro has risen to a 15-month high of $1.5061 while the yen has touched multiyear highs.

Foley said that without an adjustment in Chinese exchange rate policy, the European Central Bank "may have little option but to increase jawboning to try and stem the pace of the euro's gains against the dollar."

By mid-afternoon London time, the euro was down 0.8 percent at $1.4850 while the dollar rose 0.3 percent to 89.32 yen.

SOURCE: http://www.google.com/hostednews/ap/article/ALeqM5h3kgMAkbLwyfxBdjzw8Pc4KZ7DhQD9C1C6I80