UUP holds long futures contracts on the US Dollar Index, which measures the dollar against a basket of six currencies: the euro (about 58 percent), Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. The fund gains when the dollar strengthens against this basket and loses when it weakens. Dollar movements are influenced by interest rate differences between the US and other economies, demand for safe-haven assets and trade balances. A stronger dollar generally reduces the overseas earnings of US multinationals and puts pressure on commodity prices and emerging market assets. The fund holds Treasury bills as collateral for the futures, which generate income distributions. UUP is used for currency exposure or to hedge non-US positions and is generally a tactical rather than a core holding.
