Dollar Selloff Is Risk To Stock Market

March 19, 2009 at 8:23 am  ·  Category: Commodities, Currencies, Federal Reserve, Gold, Inflation, Market Commentary

The dollar continues to tank and commodities continue to rally in the wake of yesteday’s Fed announcement:

  • The euro is up another 2 cents versus the dollar to $1.37 – after rallying 4 cents yesterday after the Fed announcement. 
  • Oil is up $3 to $51 – its highest level since the very beginning of the year.
  • Gold is up another $15 or so – after rallying $60 yesterday after the Fed announcement.

This reminds me of market action in the wake of the Fed’s decision back in June of last year.  I interpreted the action back then in this post: “Revisiting Last Week’s Selloff – It’s All About Oil, The Dollar And Inflation”, Top Gun FP, June 30, 2008.

The action in the currency and commodities markets show that there is no free lunch.  The Fed move boosted bonds and stocks but it also hit the dollar.  That is, stocks and bonds are now worth more nominally, but their purchasing power has been correspondingly reduced.

If the dollar continues to get hit, at some point it will scare the stock market…..

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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