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25 Sep 2015
Post FOMC: Stocks down, dollar up and above – BBH
FXStreet (Delhi) – Research Team at BBH, suggest that the S&P 500 has fallen around 5.75% since the post-FOMC high while the dollar has risen against most currencies in the same period with notable exceptions being the Swiss franc, which strengthened dramatically after the SNB lifted its cap on the currency. The yen has also risen against the dollar this year, though its only 0.13% rise.
Key Quotes
“It is a misleading question to ask what is the correlation between the dollar and the stock market. The dollar does not exist like that. The dollar's value is only known in terms of something else, such as against the euro or yen. Using the Dollar Index lends itself to confusion because of its weighted components. It is also not particular rigorous to eyeball the time series to claim a correlation, which is a statistical relationship.”
“Both the euro and yen are inversely correlated with the S&P 500. Both correlations appear to be near extremes though the 30-day correlations are even more extreme. While recognizing that the inversion can become deeper, these levels do not seem sustainable. The correlations are likely to become less inverse in the period ahead.”
Key Quotes
“It is a misleading question to ask what is the correlation between the dollar and the stock market. The dollar does not exist like that. The dollar's value is only known in terms of something else, such as against the euro or yen. Using the Dollar Index lends itself to confusion because of its weighted components. It is also not particular rigorous to eyeball the time series to claim a correlation, which is a statistical relationship.”
“Both the euro and yen are inversely correlated with the S&P 500. Both correlations appear to be near extremes though the 30-day correlations are even more extreme. While recognizing that the inversion can become deeper, these levels do not seem sustainable. The correlations are likely to become less inverse in the period ahead.”