Sunday, August 09, 2009
US markets rally, and so does dollar
Something different happened on Friday - dollar turned up even as markets rallied. For a long time now, markets and dollar were moving in the opposite direction. Last year, dollar went through the roof as the financial crises intensified. So this is probably significant if it is a break in a pattern, and is worth keeping a close eye on. Somewhere in the interest rate market (10Y approaches 4% - it is at 3.85% now) or the currency market will emerge the first signs of trouble. Dollar strength could signal US markets outperform emerging markets in dollar terms, especially commodity driven emerging markets as commodities are inversely related to dollar.