Dollar Retreats on Euro Confidence

The U.S. dollar index declined on Tuesday. The U.S. dollar had been rallying the past few days as concerns over Europe may have prompted investors to flee into dollars in a play. The dollar index fell below $76 on Tuesday after peaking near $76.37 on Monday. The dollar index hit its all-time low earlier in May when it approached $73. According to Bloomberg, German business confidence hit a record high in May, which could prompt the European Central Bank to raise interest rates, despite the debt problems faced by other member nations. The Associated Press reported that there was strong investor demand for a $3.2 billion Spanish bond sale. The combination of the two factors may have convinced investors to move back out of cash. Investors looking to play continued U.S. dollar weakness may wish to consider PowerShares DB USD Bearish Index UDN. UDN attempts to return a value corresponding to the inverse performance of the U.S. dollar. Investors could also consider gold or silver. The metals rallied on Tuesday, and investors may contemplate a play on SPDR Gold Trust GLD or iShares Silver Trust SLV. Traders should decide for themselves the direction they believe Europe is heading in before acting. The dollar may turn if new cracks show in the European foundation.