By Nicholas Santiago on February 9th, 2010 3:44pm Eastern Time
Today's action in the U.S. Dollar index has been nothing short of wild. The dollar can be tracked by following the PowerShares DB US Dollar Index Bullish (NYSE:UUP). As comments come out of Europe regarding the debt of Greece and several other countries, the dollar seems to get whipped around. Since March 2009 the stock market has rallied on the back of the falling U.S. Dollar. Since the late November time frame the U.S. Dollar index has rallied and continues to remain near 7 month highs.
Many attribute the recent rise in the dollar to several falling European Nations. Countries such as Iceland, Greece, Ireland, Lithuania, Spain, and Portugal, are all reported to have financial troubles putting the European Union to the test. Usually if there is one nation in trouble there are more. Basically, there is not one nation that is immune from financial problems at this time.
In December 2008 the dollar caught a strong bid higher as the markets were filled with fear. The U.S. Dollar index traded from a December 2008 low of 78.00 to a March 2009 high of 89.62. Please realize that this was a 13 percent increase in the dollar in just three months. When the world gets fearful most traders and investors look to hold dollars and not other currencies.
Today the SPDR S&P 500 ETF (NYSE:SPY) gapped up sharply higher to start the day. This move up occurred while the dollar was down sharply to start the day. For quite some time now most commodities and inflationary stocks have traded higher as the dollar declines and lower when the dollar rises. These days the major indexes trade virtually in an inverse lockstep relationship with the dollar. These moves can be seen perfectly on an intra-day chart. Currently every trade is a dollar trade.
Comments