Currency ETFs News:

The U.S. dollars rally reversed course last week. While the Federal Reserve policy changes could help support the greenback over the long-run, traders can utilize inverse USD-related exchange traded funds to hedge any short-term turns.

Over the past week, the PowerShares DB US Dollar Index Bullish Fund (NYSEArca: UUP ). which tracks a basket of the six major world currencies – the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, dipped 0.9%.

Meanwhile, the PowerShares DB US Dollar Index Bearish Fund (NYSEArca: UDN ). which tracks the inverse, or short, performance of the U.S. dollar against the same basket of six major currencies, gained 0.9% over the past week. Additionally, for the more aggressive traders, the PowerShares DB 3x Short US Dollar Index Futures ETN (NYSEArca: UDNT ). which tries to provide a -300%, or three times the inverse, returns of the U.S. dollar, increased 2.7%. [Profit From a Falling Dollar With These ETFs ]

Currency traders have been building up their U.S. dollar exposure over the past few months, writes Chiara Albanese for the Wall Street Journal. Consequently, any slight negative outlook could shake the crowded trade.

In normal market conditions, the growth-sensitive Australian dollar would have depreciated against the greenback during a sell-off on global growth concerns. However, the Aussie appreciated against the USD last week despite the selling on global weakness, which suggests that the extreme run up in the dollar or run down in the Aussie could have been a factor.

Other traders are also growing wary over the crowded bet on the U.S. dollar.

We have recently trimmed exposure more based on extreme momentum readings than anything else,” Alliance Bernstein portfolio manager Daniel Loughney said in the article,

Nevertheless, Loughney still expects the dollar to have further to run based on prospective central bank action. For instance, the European Central Bank and Bank of Japan are enacting looser monetary policies, whereas the Federal Reserve is on course to end its bond purchasing program and hike rates next year.

PowerShares DB US Dollar Index Bearish Fund

For more information on the USD, visit our U.S. dollar category .

Max Chen contributed to this article .

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.