Monday, 23 February 2009

Inverse tracker of dollar tracks the S&P 500


I am struck by the similar configuration and contours between the chart of the S&P 500 over the last few months and that for the exchange traded fund, UDN, which provides an inverse tracker to a broadly based dollar index. There is definitely a counter cylical trend emerging where as risk aversion increases and equities sell off so the dollar rallies and vice versa.
The Euro is benefiting from this trade in Europe this morning but as mentioned here recently there are some fairly profound structural problems confronting European monetary union and the euro, and it is a currency which would drop suddenly as capital flight by sovereign wealth funds surfaces again.

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