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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Bill Harmond who wrote (11916)	6/5/2002 10:24:17 PM
From: Lizzie Tudor	Respond to of 57684

This piece has similar comments about the dollar- thestreet.com Dollar Denial In reaction to yesterday's piece about how the stock market was following the dollar, I got several thoughtful emails from readers who pointed out the limited correlation between stocks and the dollar in recent years. One reader sent me a string of data showing performance of the Dollar Index and the Dow going back to 1986, and there was seemingly very little connection between the two on any year-over-year basis. (Meanwhile, Realmoney.com contributor Howard Simons has written eloquently about how the weakening greenback isn't hurting either stocks or bonds. Points taken, and perhaps the dollar and the market will decouple over time. But given that the dollar is on the minds and lips of nearly every equity trader and strategist out there, I'm hard-pressed to believe currency trading isn't having some impact on equities (and vice versa), at least on a short-term basis. Today, for example, the dollar rose to 124.41 yen in New York trading vs. 123.93 yen yesterday, while the euro slid to 93.90 cents vs. 94.10 cents yesterday. The dollar's strength and the stock market's rally were not coincidental, I submit, just as the dollar's strength contributed to gold's weakness (and vice versa). The price of gold fell 2% to $322.10 per ounce today, while the Philadelphia Stock Exchange Gold & Silver Index lost 2.9%. "There is linkage, but it's not that stocks are going down because of the dollar" or vice versa, said Lisa Finstrom senior currency analyst at Salomon Smith Barney. "Both are going down because of the negative headlines, concerns about corporate profits, and a waning of optimism about the U.S."