US Dollar: A Puppet of the Stock Market? - by Kathy Lien
The rollercoaster ride in the stock market also hit the currency market today. At one point, the rally in the US dollar evaporated as the stock market collapsed on fears that the financial sector could be in for more trouble. After having been up more than 100 points at the beginning of the US trading session, the Dow Jones Industrial Average choked back all of those gains to end the day down 56 points. This was not before falling more than 160 points, then reversing back to flat and then dropping once again. The meltdown in stocks was triggered by Lehman Brother’s warning that Fannie Mae and Freddie Mac could be forced to raise as much as $75 billion in capital to offset write downs and meet new accounting rules. Fresh trouble in the financial sector is the type of uncertainty that the market cannot handle right now. The new earnings season is about to begin and Fannie and Freddie’s problems resurrect concerns about the resiliency of US companies in the face of soaring prices and falling demand. The US dollar has merely been a puppet of the stock market today as liquidation out of US stocks lead to liquidation out of the US dollar.
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