As
the Covid-19 pandemic exacerbates the battle between risky and safety assets,
the inverse relation between the S&P 500 index and the dollar index appears
to be crystal clear.
While
fundamentally it is not quite easy to depict a clear correlation between equities
and currency, the chart shows the longer the rally, the more S&P moves oppositely
versus the green currency.
Following
a fall of more than 20 percent in the first quarter, the S&P managed to
rebound strongly, where it has so far generated 25 percent surge from April until
June 18.
With
most Fed members predicting the near zero interest rate to last through 2022
and the generous stimulus plans to curb corona economic damage, investors are preferring
high-risk asset, especially after the recent reopening that triggered hopes of
seeing a V-shaped recovery.
On
the other hand, the dollar, which is deemed as a refuge asset during times of
crisis, edged down by 0.78 percent in May and plummeted 0.79 percent in June, up
to now.
The S&P climbed
to its highest level since nearly 15 weeks on June 8 to set a solid inverse
relation with the dollar at -0.6377.