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Why has the dollar risen while the stock market is falling?

I’m new to forex trading. Why has the dollar risen while the stock market is falling? To me this seems counterintuitive can someone please explain.

Forex | 👁 634 | Posted 2018-03-05 | Share on Facebook | Twitter | Google+

| Modified: 2018-03-05 | Author:

18 Comments

MrGrayBlue 9 months ago

US companies won't make as much money when it costs more to borrow USD, so the future value of their stock isn't as high as it was when USD was easier to come by.

mrubuto22 9 months ago

Also as the dollar falls it generally makes the prices of a stock increase. $100 USD buys 1 part of company X value of $100 USD decreases but value of X does not so more USD is needed to buy X This massive increase in the stock market isn't really as good as it looks as an American investor using USD. More or less just been treading water if you do any kind of business outside the US

luaudesign 9 months ago

People are trading stocks for dollars.

LazarusCam 9 months ago

Low unemployment and stable wages have led to increased consumer confidence so Americans are spending and the dollar is inflating. Inflation then drives up the price of goods and services and reduces the purchasing power of a single unit of currency which impacts the input costs of a lot of the larger corporations. This gets people worried so the stock market starts to become more volatile. This does not mean that the market will continue to fall, but inflation unchecked can lead to a stalling of the economy. Feds then keep this in check by raising interest rates.

LazarusCam 9 months ago

Actually, Gold and the USD typically move opposite of each other. This is why Gold has been down while the dollar has been up.

asuliberty 9 months ago

Most people are going to cash. Sell stocks, buy dollars. Trillions flooding usd pushes the dollar up. Just like any other investment, more buyers than sellers=prices going up. Simple shit, bud!

37TS 9 months ago

This has not been always the case, like with summer 2016, when we've seen the dollar and stocks rallying in the same direction many times.

Radrezzz 9 months ago

The stock market did recover some, and usd has yet to breakout on both daily eurusd and usdjpy charts, so Im inclined to think this recent sell-off was an overreaction.

El_Huachinango 9 months ago

Money flees the market in fear, it needs someplace safe, USD is a safe haven.

enivid 9 months ago

The dollar is rising due to market participants pricing in more aggressive tightening by the fed. Sorry, but that is not the case. Interest rate hike probability (derived from fed funds futures prices) declined during the days when S&P tanked and USD rose. The logic here is that, market participants do not expect the Fed to risk tightening monetary policy in case of a financial turmoil, which could have been starting with S&P crash.

Radrezzz 9 months ago

Its been my experience that oil companies dont necessarily follow the price of oil. They know how to hedge with futures contracts so their current price reflects the unrecovered price of oil 6 months ago. Very hard to predict. I think GBP and their interest rates had the same effect on their stock market as it did in the US - there simply was nowhere else to put money to keep pace with inflation. Oil prices affect oil producing nations like Canada more.

OliverEady7 9 months ago

Something else you should bare in mind, which I haven't seen mentioned. Low dollar is good for exporting, high dollar is good for importing. Low dollar means American companies are making more from exporting their goods all over the world. When the dollar gets stronger, the companies that export internationally are making less money, so their stock price goes down. For example oil companies want a weak dollar, as the price of the barrel oil is in dollars, the weaker the dollar, the more dollars they'll get for a single barrel of oil. A similar thing happened with Brexit in the UK, the GBP went down significantly because of the uncertainly in Britain's economy. But a weak pound meant that companies, like Shell (oil) were making significantly more money, so (perhaps) counter intuitively the UK stock market rose after Brexit, even though there was a lot of FUD.

Helgi_Hundingsbane 9 months ago

When one sells stocks they get dollors. When the Dow goes down USD goes up.

syniczFx 9 months ago

The dollar is rising due to market participants pricing in more aggressive tightening by the fed. This pricing effect is also seen in the bond markets as well. With bond yields rising, it makes them more attractive on a risk adjusted basis compared to stocks (Treasury bonds are usually seen as risk free). Also, higher interest rates makes borrowing more costly. Thus less businesses will borrow. This will have a negative effect on their productivity, which will result in share prices falling. The higher interest rates will also have negative effect on consumer spending as well. As markets are forward looking, markets are pricing the aforementioned factors AS IF they already occured. In short, US stocks are falling while the dollar is rising due to the expectation of higher interest rates.

Keiyashi 9 months ago

Great question. I was wondering the same thing. The answers provided are really helpful in getting a better understanding of the currency market related to USD!

Radrezzz 9 months ago

Stocks are a risky asset. They have been attractive to investors for the last few years since dividend yield has been higher than interest rates. As interest rates rise investors move money from risky stocks to safer bonds. That causes USD value to rise. Currency traders are also buying dollars because they get daily interest in their favor over most currencies in quantitative easing like jpy, eur, chf, etc.

lelease 9 months ago

People are selling stocks for dollars. Excess of stocks, demand for dollars. What's counterintuitive about it?

LincolnHighwaySign 9 months ago

Stocks around the world have fallen and the dollar is similar to gold in being a safe haven when times are bad.


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