currency correlations?

Question

why sometime usd correlates highly with stocks and other times its almost completely inverse correlation?

usd against us stock indexes

Answer 1

Currencies don't always parallel the stock market because they're two completely separate financial markets.

The real issue has to do with the main focus of investors and traders. With the stock markets, they're focused more on things like corporate earnings, inflation, and economic strength. Corporate earnings and news is more important than politicial issues.

With the currency markets, the main focus is on the strength of the US economy compared to others. How individual companies do isn't nearly as important here, but political issues and overall economic conditions are far more important.

Sometimes things jive, but other times, they don't.

It's just like why did the NASDAQ rise, while the DOW fell. They're both stock markets right? True, but they are composed of different companies and have different things going on. Sometimes they move in tandem, while other times they move independently.

With the stock and currency markets, you're dealing with two totally distinct and separate markets focused on different things.

Answer 2

You got me, do not know what country you are using as an example.