Dollar Gaining On Weak Consumer Confidence Numbers (UUP)

The dollar has rallied today, after a report gauging U.S. consumer confidence showed a wider than expected decline. The Conference Board, which is a private research group, said that its index of consumer confidence dropped to 46.0 this month, from a revised 56.5 in January. Economists had been expecting the number to come in at 54.8.

For new investors, this may seem a bit counter-intuitive. Why would a decline in U.S. consumer confidence result in increased confidence, as evidenced by buying, in the U.S. currency? The answer comes down to how the consumer confidence number effects investors' risk appetite. In this case, risk appetite has declined as a result of the weak numbers. The dollar is still considered the world's safest currency (a strong argument could be made that this is ridiculous), in times of heightened risk. Hence, the move higher in the dollar in the wake of consumer concerns. If you are interested in using the stock market to play the dollar from the long side, consider buying the PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP), which tracks the value of the U.S. dollar versus a basket of foreign currencies.