NEW YORK (MarketWatch) — It’s probably not the dollar’s unrelenting march higher that is unsettling U.S. stock investors, but it might be the speed of the rally.
“I think what people are concerned about is the pace of the dollar strength,” Douglas Borthwick, managing director at Chapdelaine Foreign Exchange, in a phone interview, on Tuesday.
“Countries can always adapt to currencies strengthening or weakening, but certainly as the dollar strengthens very, very quickly it leaves very little chance for others to adapt,” he said.
In the end, it all seems to come down to context. If the dollar rises because investors are confident about the future of the economy, then stocks can rise, too, as was the case in the late 1990s.
If the dollar is rising because investors are frightened and scrambling for safety, then it is no surprise that stocks and other assets perceived as risky tend to suffer, such as during the 2008 financial crisis. See: The reason a strong dollar is hurting stocks right now.
Right now, it may be a case of the latter, with the speed of the dollar’s rise serving as the source of that economic anxiety, Woo says. Stock investors shrugged off a rising dollar in 2014; in 2015, the S&P 500 fell in 19 out of the 27 trading days the dollar had risen through Tuesday, he noted.
Full article: The blistering pace of dollar’s rally is rattling markets (Market Watch)