FX Graph

S&P long rally highlights inverse relation with dollar

S&P long rally highlights inverse relation with dollar

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.

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