The U.S. dollar was one of the best performing currencies in 2015. The dollar strengthened amid speculation that the Federal Reserve might hike benchmark interest rates. Initial expectations were for a rate hike by mid-2015. However, the Fed delayed it in the wake of weakness in the global economy. The rate hike finally came at the Fed’s December 2015 meeting.
Since the December rate hike, there has been speculation over the pace of rate hike. At the end of last year, the Fed had predicted at least four rate hikes in 2016. But given the turmoil in the global markets, the Fed now predicts only two rate hikes for the rest of this year. However, the next rate hike could come as early as this month when the Fed holds its next monetary policy meeting. A rate hike at the next meeting could boost the U.S. dollar, especially given that all other developed world central banks are implementing easing measures.
One way to bet on the greenback is through the Horizons U.S. Dollar Currency (ETF) (TSX: DLR). The fund has fallen more than 7% so far this year, but with a potential rate hike coming in the near future, we could see a rebound.
